ORDER
Joginder Pall, A.M.
1. This appeal of the Revenue and cross-objection filed by the assessee arise from the order of CIT(A), Jodhpur, for the asst. yr. 1994-95. Since the issue raised in the Revenue’s appeal and the cross-objection filed by the assessee arise from the same order of the CIT(A), these were heard together and are being disposed of by this consolidated order for the sake of convenience.
2. First we take up Revenue’s appeal. The first dispute raised in this appeal relates to deletion of trading addition of Rs. 54,496. The AO observed that the assessee had shown GP of 13.85 per cent for the assessment year under reference as against GP shown at 21.19 per cent in the case of Shri Kiran Raj Solanki, proprietor of M/s Solanki AC Pipe Industries, Jalore, engaged in the same kind of business. The AO, therefore, applied the provisions of Section 145 and estimated the income by applying GP rate of 21.19 per cent as shown in other cases and thereby made a trading addition of Rs. 54,469. Aggrieved, the assessee impugned the addition in appeal before the CIT(A). It was submitted before the CIT(A) that the AO had relied on the case of Kiran Raj Solanki, proprietor of M/s Solanki AC Pipe Industries, without allowing any specific opportunity to the assessee and without asking the assessee to show cause why the same rate of GP should not be applied. Thus, the addition made was contended to be in violation of principles of natural justice. It was also pointed out that the GP shown by the assessee at 13.85 per cent was better than the GP shown at 12 per cent of the immediately preceding assessment year. It was also pointed out that the assessee had cited a case where GP of 10.22 per cent was declared and accepted by the Revenue. Thus, it was argued that the AO was not justified in making the trading addition by rejecting the book results by applying a GP rate of 13.85 per cent. Accepting the contentions of the assessee, the CIT(A) deleted the impugned addition on the ground that the AO was not correct in applying the provisions of Section 145 and in making the addition by relying on another case ignoring the vital fact that the GP shown by the assessee was better than last year. He further observed that even during the course of survey carried out by the IT authorities, no discrepancy or ho paper showing unaccounted purchases or sales was found. The Revenue is aggrieved by the order of CIT(A). Hence this appeal before us.
3. The learned Departmental Representative simply relied on the order of the AO.
4. The learned counsel for the assessee, on the other hand, heavily relied on the order of CIT(A) and reiterated all the submissions made before the authorities below.
5. We have heard both the parties and given our thoughtful consideration to the rival submissions with reference to facts, evidence and material on record. We are in agreement with the CIT(A) that this was not a fit case for rejection of book results and for applying the provisions of Section 145 merely on the ground that the GP shown by some other assessee’s was better than the GP shown by the assessee, moreso when the GP shown by the assessee was higher than the GP shown in the earlier assessment year. Besides, the AO has not pointed out any specific defects in the books of account. All purchases and sales were fully vouched and on the top of it, no discrepancy was found at the time of survey. No instance of understating the sales or inflation of purchases has been pointed out by the AO. Thus, we do not find any merit in the appeal of the Revenue. Accordingly, we confirm the order of the CIT(A) and reject this ground of appeal.
6. The second ground relates to deletion of addition of Rs. 2,52,846 made on account of short stock found at the time of survey. The facts of the case are that the AO made an addition of Rs. 2,52,846 on account of the reason that the stock found at the time of survey was short i.e., the stock found was Rs. 5,75,453 whereas the same should have been at Rs. 8,06,448.
7. Aggrieved, the assessee carried the matter in appeal before the CIT(A). It was vehemently argued before the CIT(A) that there was no shortage of stock. The so-called discrepancy was on account of the reason that the assessee had adopted the practice of working out stock of various goods in terms of cu. ft. whereas the IT authorities had taken on the basis of sq. ft. It was also pointed out that this discrepancy was pointed out at the time of survey itself. Thus, it was contended that the very basis of addition was wrong. Accepting the contention of the assessee, the CIT(A) has deleted the impugned addition by recording the following finding in para 5.2 of the impugned order :
“I have considered the submissions of the learned Authorised Representative very carefully in this regard. I have also given proper thought to the reasoning given by the AO for making the addition of Rs. 2,52,846. After consideration of the matter, I hold that the AO was not at all justified in making the addition of Rs. 2,52,846 by assuming that stock found short was sold outside the books of account because the addition was made only on the basis of assumption and presumption that the appellant had sold the stock to the tune of Rs. 2,52,846 outside the books of account. There was no evidence whatsoever in the possession of the AO that the appellant did any work of this type. Survey was conducted in the last quarter of the accounting year and the survey team did not come across any evidence in respect of suppression of income. No sale was found unrecorded, no purchase was also found unrecorded. Without any evidence on record, the AO cannot hold that the appellant had sold any stock outside the books of account. Moreover, while computing the shortage of stock, the AO had totally ignored explanation of the appellant given then and there during the course of survey proceedings itself. Accordingly, I hold that the AO was absolutely unjustified in making the addition of Rs. 2,52,846. The addition made by him is hereby deleted and the appellant will get a relief of Rs. 2,52,846.”
The Revenue is aggrieved by the order of CIT(A). Hence this appeal before us.
8. The learned Departmental Representative relied on the order of the AO.
9. The learned counsel for the assessee, on the other hand, heavily relied on the order of CIT(A) and reiterated the submissions made before the authorities below. He referred to the statement of the accountant recorded by the AO at the time of survey (a copy placed at pp. 1 to 6 of the paper book). He submitted that during the course of recording the statement, this fact was pointed out to the AO that the assessee had followed the practice of working the value on cu. ft. basis and not on sq. ft. basis. He particularly referred to answer to question No. 10 of the statement. He further submitted that not a single discrepancy was found during the course of survey. He further referred to two letters dt. 16th May, 1995 and 29th Nov., 1996, submitted before the AO (copies placed at pp. 6 to 8 of the paper book). Thus, he submitted that the AO totally overlooked the facts and made a wrong addition and the CIT(A) rightly deleted the same.
10. We have heard both the parties and given our thoughtful consideration to the rival submissions with reference to facts, evidence and material on record.
The factual position stated by the assessee that the stock was being shown on the basis of cu. ft. and not on the basis of sq. ft. has not been controverted by the Revenue. Once the assessee had pointed out this fact at the time of survey itself, it was the duty of the survey party to verify this fact before concluding that there was a shortage in the stock. The assessee has all through maintained the same stand and the AO has not cared to rebut such contention of the assessee. Coupled with this is the fact that even during the course of survey, no document or discrepancy in the books of account indicating suppressed sales or inflated purchases was found. Thus, in the light of these facts and circumstances of the case, we are of the considered opinion that the CIT(A) was justified in deleting the impugned addition. We confirm his order and dismiss this ground of appeal of the Revenue.
11. We now take up the cross-objection of the assessee. The first ground relates to sustaining of disallowance of Rs. 3,000 out of disallowance of Rs. 5,578 made by the AO in respect of office expenses. Briefly stated, the facts of the case are that the AO observed that the assessee had incurred office expenses at Rs. 16,735 as against expenses of Rs. 18,383 of the last year. The AO disallowed an amount of Rs. 5,578 on ad hoc basis on the ground that the assessee had not given any explanation for incurring such expenses and the expenses were also not fully vouched. On appeal, the CIT(A) reduced the disallowance to Rs. 3,000. The assessee is aggrieved by the order of CIT(A). Hence this appeal before us.
12. The learned Authorised Representative submitted that the disallowance was totally unjustified as the expenses incurred for the assessment year under reference were on the lower side.
13. The learned Departmental Representative on the other hand, relied on the orders of the authorities below.
14. We have heard both the parties and considered the rival submissions. We do not find any justification in sustaining the impugned disallowance for the reason that the expenses incurred in the assessment year under reference were on the lower side as compared to last year and no specific instance has been pointed out by the AO which could justify any disallowance. Accordingly, we set aside the order of CIT(A) and delete the impugned disallowance. This ground of cross-objection is allowed.
15. The next ground relates to sustaining of a disallowance of Rs. 1,500 out of disallowance of travelling expenses at Rs. 2,802 disallowed by the AO on account of unverifiable nature of the same. We find that the disallowance sustained by the CIT(A) is nominal and, therefore, we decline to interfere with the order of the CIT(A). This ground of cross-objection is rejected.
16. In the result, the appeal of the Revenue is dismissed and the cross-objection filed by the assessee is partly allowed.