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The ITO-25(3)(2), C-11, R.No.306,Pratyaksh Kar Bhavan, Bandra Kurla Complex,Bandra(East) Vs. Shri Kaushik H. Pandhi,A/4, Joy Co-op. Soc., Charkop,Kandivali (W) Mumbai 400 013
September, 11th 2015
                    MUMBAI BENCH "A", MUMBAI

                      ITA No. 4226 /MUM/2012
                     (Assessment Year : 2008-09)
The ITO-25(3)(2),
C-11, R.No.306,Pratyaksh Kar Bhavan,
Bandra Kurla Complex,Bandra(East)                ... Appellant


Shri Kaushik H. Pandhi,
A/4, Joy Co-op. Soc., Charkop,
Kandivali (W)
Mumbai 400 013
PAN: AAFPP6497D                                        .... Respondent

            Appellant by              : Shri Rakesh Ranjan
            Respondent by              : Shri Jitendra Jain
      Date of hearing                 :       23/07/2015
      Date of pronouncement            :      09/09/2015



      The captioned appeal by the Revenue         is directed against the
order of the CIT(A)-35, Mumbai dated 26/03/2012 pertaining to the
assessment year 2008-09, which in-turn has arisen from an order
passed by the Assessing Officer     dated 24/12/2010        under section
143(3) of the Income Tax Act, 1961 ( in short `the Act').

2.    The respondent assessee is an individual engaged in the business
of dealing in multicolour offset printers & importers of machinery
under the name and style M/s. Shree Krishna Agencies.
                                                            ITA No. 4226 /MUM/2012
                                                         (Assessment Year : 2008-09)

3.    In the course of assessment proceedings, the Assessing Officer
noticed that assessee had purchased 11 Laptops for Rs.6,55,000/-, on
which depreciation allowance of Rs.3,93,000/- was claimed.                   The
assessee was show caused to explain the details of the application of
the Laptops so purchased. The Assessing Officer has noted that no
explanation was rendered by the assessee and accordingly, he
disallowed 50% of the depreciation claimed of Rs.1,96,500/-. The
CIT(A) has allowed the claim of the assessee holding that the
disallowance made by the Assessing Officer was only on the basis of
conjectures and surmises.

4.    Against   the   aforesaid,   Ld.   Departmental      Representative
contended on behalf of the Revenue that in the absence of any details
showing usage of such Laptops purchased the CIT(A) has erred in
allowing the claim of the assessee.          According to him partial
disallowance made by the Assessing Officer was quite justified.

5.    In reply, Ld. Representative for the assessee fairly conceded the
position that there were no cogent details with the assessee to
substantiate the use of the aforesaid Laptops.

6.    In view of the aforesaid, we find that the direction of the CIT(A) in
deleting the disallowance of depreciation of Rs.1,96,500/- on Laptops
is unsustainable. Therefore, the order of CIT(A) on this aspect is set
aside and Ground raised by the Revenue is allowed.

7.    The second Ground raised by the Revenue is with regard to the
action of the CIT(A) in deleting an addition of Rs.58,72,865/- made by
the Assessing Officer on account of unaccounted sales.
                                                                        ITA No. 4226 /MUM/2012
                                                                     (Assessment Year : 2008-09)

8.    In this context, relevant facts are that a verification exercise
carried out by the Assessing Officer revealed that in case of four parties
assessee had shown the amount received as advance, whereas such
amounts were received against the sales made.                          Therefore, the
Assessing Officer inferred that assessee had suppressed the sales in the
guise of advances and accordingly, he made an addition on account of
the gross profit relatable to such unaccounted sales. The addition on
account of gross profit @ 23.15% came to Rs.58,72,865/-. On this
aspect, the CIT(A) has deleted the addition by making following

      "The A.O made addition of Gross Profit @23.15% on unaccounted sales of
      Rs.2,72,31,358/- amounting to Rs.58,72,865/- on the ground that the appellant has
      already debited the direct and indirect expenses in the Profit and Loss account and
      he treated the Gross Profit as Net Profit of the Appellant. As against this, the
      appellant has submitted that the aforesaid amount of Rs.58,72,865/- was in the
      form of advance. The appellant further submitted that he did not show this amount
      as sale amount because such amount was taken against delivery of goods to three
      parties and these were on approval basis. It is normal practice of such business that
      when the machinery is handed over the customer, the final invoice is prepared after
      the customer is satisfied fully because the cost involved is very high. The appellant
      further submitted that for this simple reason the appellant had shown this amount
      as closing stock and the said stock was discharged from the books in the
      subsequent Asstt.year. The appellant further substantiated the same by the
      statement of account of subsequent year. In view of this, it is felt that any Gross
      Profit on the sale of computer and other electronic materials are not denied by the
      appellant, the important points in question here should be point of time of taxation
      of Gross Profit of the above sale as reasonable of arriving of Gross Profit ratio of
      23.15% and treating the same as Net Profit by the A.O. As regards the fixation of
      23.15% Gross Profit ratio by the a.O., to my mind it seems on a very higher or
      extreme side and may not go beyond 10%. However, going by the above
      circumstances, even the Gross Profit of 10% cannot be sustained in A.Y. 2008-2009
      because as per the appellant's written submission, "the said stock is discharged
      from the books in subsequent year"and, therefore, Gross Profit cannot be brought
      to tax in the F.Y. 2007-08 i.e. A.Y.2008-2009. Therefore, the same is deleted."

9.    Before us, the Ld. Representative for the assessee conceded that
there was no details/material available with the assessee to
substantiate the conclusion drawn by the CIT(A) that the impugned sum
                                                           ITA No. 4226 /MUM/2012
                                                        (Assessment Year : 2008-09)

was shown as "closing stock and the said stock was discharged from
the books in the subsequent Asstt.year".         So however, the Ld.
Representative for the assessee pointed out that application of the GP
rate of 23.15% to arrive at the assessable income on account of such
unaccounted sales was on a very high side and contended that GP rate
of 7% be considered as adequate to compute the income on such
unaccounted sales.

10.   The Ld. Departmental Representative pointed out that assessee
has himself declared GP of Rs.33,64,633/- on the sales declared of
Rs.1,45,34,585/-, which comes to 23.15%, therefore, the Assessing
Officer has made no mistake in applying the GP rate of 23.15% to
compute income from the impugned unaccounted sales.

11.   Having considered the rival submissions, in our view, it would
meet the ends of justice if the order of the CIT(A) is set aside and the
Assessing Officer is directed to compute the net income on account of
such unaccounted sales @10% instead of computing GP by application
of 23.15%. As a consequence, on this aspect, the Revenue partly

12.   The third Ground, in this appeal relates to action of the CIT(A) in
deleting an addition of Rs.10,600/- made by the Assessing Officer on
account of unexplained cash credit on the account of Oxford Printer.
Similarly, the fourth Ground of appeal relates to action of CIT(A) on
account of deletion of an amount of Rs.50,000/- being unexplained
credit on account of M/s. Adhunik Printer.
                                                                 ITA No. 4226 /MUM/2012
                                                              (Assessment Year : 2008-09)

13.    On both these aspects, Ld. Representative for the assessee
submitted at the time of hearing that the respondent assessee has no
cogent material to defend the action of the CIT(A) in deleting the
impugned addition. On account of aforesaid, we hereby reverse the
order of CIT(A) and restore that of the Assessing Officer on these
aspects. Thus, Ground of appeal Nos.3 & 4 raised by the Revenue are

14.    In the result, the appeal of the Revenue is partly allowed.

       Order pronounced in the open court on 09/09/2015.

        Sd/-                                  Sd/-
  (SANJAY GARG)                            (G.S. PANNU)
Mumbai,Dated 09/09/2015
Copy of the Order forwarded to :

1.    The Appellant ,
2.    The Respondent.
3.    The CIT(A)-
4.    CIT
5.    DR, ITAT, Mumbai
6.    Guard file.

                                              BY ORDER,
//True Copy//
                                             (Dy./Asstt. Registrar)
                                          ITAT, Mumbai
Vm, Sr. PS
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