IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES SMC-1 , NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA No. 1056/Del/2015 AY: 2010-11 M/s SB Industries vs. ITO, Ward 1 Prem Casting Rainbow road Muzaffarnagar Muzaffarnagar PAN: ABPFS 4829 M (Appellant) (Respondent) Appellant by : Sh. Ankit Gupta, Adv. Respondent by : Sh.N.K.Bansal, Sr.D.R. Date of Hearing : 14.09.2016 Date of Pronouncement : 16.09.2016 ORDER This appeal by assessee arises out of order passed by Ld. CIT(A), Muzaffarnagar on 31.3.2014 in relation to Assessment Year (A.Y.) 2010-11. 2. first issue in this appeal is against confirmation of addition of Rs.18 lakh made by estimating profit. 3. Succinctly, facts of case are that assessee derives income from manufacture of agricultural implements, ITA 1056/Del/2015 A.Y. 2010-11 S.B.Industries, Muzaffarnagar such as, Tasla, Fawra etc. raw material used for manufacturing these implements is scrap. Against sales for current year amounting to Rs.1.67 crores, which also included scrap sales of Rs.8.15 lakhs, assessee showed gross profit at rate of 3.33%. On perusal of details, Assessing Officer (A.O.) observed that out of total purchases of raw material (scrap) amounting to Rs.1.42 crore, assessee could produce bills worth Rs.37.26 lac and remaining purchases of Rs.1.05 crore were not verifiable. Similarly, it was found that direct expenses amounting to Rs.22.32 lakh under various heads, such as, Labour charges, Manufacturing expenses and Wages etc., were not properly vouched. In like manner, certain other deficiencies were also found qua incurring of expenses. A.O. noted that assessee also failed to produce sale bills in relation to sales shown at Rs.1.67 crore. In above factual background, he estimated sales at Rs.1.80 crores. By applying estimated net profit rate of 10%, he computed income from business at Rs.18 lakhs. Ld. CIT(A) sustained addition, against which assessee has come up in appeal before tribunal. 4. After considering rival submissions and perusing relevant material on record, it is observed that there are certain contradictions in recording of factual position by AO and assertions made on behalf of assessee. Whereas A.O. has recorded that assessee produced purchase bills only for Rs.37.26 lakhs out of total of Rs. 1.42 crores, Ld. A.R. has placed on record copies of all invoices and submitted that these were available before A.O. as well. Similarly there are 2 ITA 1056/Del/2015 A.Y. 2010-11 S.B.Industries, Muzaffarnagar contradictions qua support for expenses. It is also found that A.O. has not given any basis for estimating sales at Rs.1.80 crore and further application of profit rate at 10%. As assessee now claims to have entire material available with it enabling A.O. to complete assessment on basis of declared results, I consider it expedient to set aside impugned order and remit matter to file of A.O. for determining income as per law on basis of evidence now available with assessee. I order accordingly. 5. last ground of this appeal is against confirmation of addition of Rs.10 lakh. assessee had shown two creditors, namely, M/s Shree Krishna with balance of Rs.7,28,708/- and M/s Gupta Sales with balance of Rs.2,71,292/-. On being called upon to establish genuineness of these creditors, assessee filed photocopies of bills. A.O. observed that invoices were not checked up by any trade tax authority. assessee submitted that outstanding balance of Rs.10 lakh to these two parties was paid by cheques in following year. Since assessee could not produce relevant bank account, A.O. opined that assessee paid said amounts in cash from its undisclosed sources during year itself. This led to making of addition of Rs.10 lakh. ld. CIT(A) sustained same. 6. After hearing rival submissions and perusing material on record, it is observed that balance of Rs.10 lakh appearing in accounts of these two parties does not appear in balance sheet of assessee for succeeding year, copy of which is 3 ITA 1056/Del/2015 A.Y. 2010-11 S.B.Industries, Muzaffarnagar available on record. This shows that outstanding balances at end of current year were duly discharged by assessee in succeeding year. observation of A.O. that invoices were not checked by any trade tax authority is again incorrect as is apparent from copies of bills. It can be seen that these bills apparently contain all relevant particulars, some of which are duly checked. Be that as it may, these amounts totalling Rs.10 lakh represent trade creditors. When A.O. rejected books of accounts and proceeded to estimate income by applying percentage of profit on estimated trade sales, it was no more open to him to again revert to books of accounts and make separate additions from transactions concerning purchases and sales. In view of foregoing discussion, I am of considered opinion that Ld. CIT(A) was not justified in sustaining addition of Rs.10 lakh, which is hereby deleted. This ground is allowed. 7. In result appeal is partly allowed. order pronounced in open court on 16.09.2016. Sd/- (R.S. SYAL) ACCOUNTANT MEMBER Dated: 16.09.2016. Manga 4 ITA 1056/Del/2015 A.Y. 2010-11 S.B.Industries, Muzaffarnagar Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT (A) 5. DR, ITAT By Order AR, ITAT, NEW DELHI. 5 ITA 1056/Del/2015 A.Y. 2010-11 S.B.Industries, Muzaffarnagar Date 1. Draft dictated on 14.9.16 2. Draft placed before author 3. Approved Draft comes to Sr.PS/PS 4. File sent to Bench Clerk 5. Date on which file goes to Head Clerk. 6. Date on which file goes to AR 7. Date of dispatch of Order. 6 M/s SB Industries v. ITO, Ward-1, Muzaffarnagar