ORDER ASHFAQ AHMAD, ACCOUNTANT MEMBER. These cross appeals for the Assessment Year 1994- 95 filed by the assessee as well as by the department against the order of the CIT(A). The assessee has contested the order of the CIT(A) on the following grounds:
(1) That the learned CIT(A) erred in confirming the following additions:
(1) Selling & distribution of expenses Rs.700.000
(2) Administrative expenses 250,000
(2) That the learned CIT(A) grossly erred in ignoring the depreciation allowance which is a statutory allowance.
(3) That the learned CIT(A) grossly erred in confirming the levy of turnover tax by including excise duty and sales tax.
On the other hand the department is in appeal on the following grounds;
(1) Rejection of declared results.
(2) Relief in profit and loss account:
(i) selling and distribution.
(ii) Administrative expenses.
2. The brief facts of the case are that the assessee a private limited company, derives income from running a beverage company taken on lease. Return was filed to declared a loss of Rs. 1,126.405/-.
In response to notice under section 61 the AR of the assessee produced the books of account. The assessee declared sales at Rs.58,513,456/- yielding a G.P. Rate of 30.58%. The Assessing Officer for a number of reasons mentioned in the body of the assessment order rejected the declared version and estimated the sales at Rs. 19,200,000/- to which a G.P. Rate of 32% was applied. The assessee claimed expenses under the head selling and distribution expenses at Rs. 13,839,286 out of which Rs.1,500,000 were disallowed as these were not open to verification. Administrative expenses were claimed at Rs.2,159,853/- out of which Rs.521,110/- were disallowed as some of the expenses were not verifiable. Depreciation was claimed at Rs. 1,320,500 normal as well as initial depreciation as per schedule in respect of vehicles/trucks. As depreciation was also claimed in respect of cars used by the directors the to disallowed a sum of Rs.6,00,000/-. Accordingly the assessment was finalised at an income of Rs.2,802,839/-.
3. The assessee being aggrieved preferred an appeal before the CIT(A) who accepted the declared version of the assessee whereas the additions under the heads selling and distribution and administrative expenses were reduced to Rs.7,00,000/- and Rs. 250,000/- respectively.
The assessee's appeal is disposed of as under:
4. The reduction allowed by the I learned CIT(A) to Rs.700,000/- and Rs.250,000 in respect of selling and distribution expenses and administrative expenses respectively is in order and calls for no interference as necessary relief has been allowed by the CIT(A). The and backs are accordingly confirmed.
5. The to has rightly disallowed the depreciation on motor vehicles used by the Directors. No interference is called for in this respect.
6. The CIT(A)'s action in confirming the levy of turnover tax by including excise duty and sales tax is also in accordance with law. The appellant-company has also not furnished details of excise duty paid. Therefore, the tax under section 80-D was rightly levied. The appeal of the assessee being devoid of merit is accordingly dismissed.
Departmental appeal
7. The D.R. Was absent despite the fact that he had sought adjournment on 6.6.1996 to prepare the case which was allowed. During the course of the hearing the AR of the assessee urged that the, appellant had taken over a sick unit and this was the first year of the assessee's business, and not a single specific defect has been pointed out by the to with regard to purchases. It was also urged that the assessee had cited the case of prominent leading beverage company at NTN 07-20- 177209 wherein G.P. Rate at 28.94% was accepted by the department. It was argued by the AR that this parallel case has been cited in the body of the order but has not been discussed while applying a higher G.P. Rate in the case of the assessee. It was also pointed out by him that as per order of the CIT(A) after adjustment- of the lease money G.P. Rate works out to 35.3% which is higher rate declared by any beverage company. The AR further stated that the to has not attacked the sales version of the appellant at any point. In this context he stated that there are number of reported cases of which he cited the following:
(1) Improvement in sales and G.P. Rate, no evidence regarding under statement of sales in respect of locally purchased goods addition not justified. (1981) 44-Tax-78-Trib.
(2) Failure to maintain stock register but profit rate declared was not ridiculously low book version not liable to be rejected CIT Versus Chaudhry Brothers (1980) 42-Tax
(8) We have heard the AR and also perused the order of the CIT(A). While directing the acceptance of the trading results the CTT(A) has observed.
"It was further argued that rate declared by the appellant was even better then the rate declared by the lessor company in the earlier years. Lease money amounting to Rs.2,815,636/- is debited to the trading account whereas this should have been properly claimed in the P&L account. After adjustment of the lease money G.P. Would work cut at 35.3% which is better than the rate declared by the lessor company in the past or applied by the department."
9. Taking the above fact into consideration, the order of the CTF(A) and the arguments and case laws cited by the AR we have no hesitation in rejecting the departmental appeal on this issue. With regard to the P&L expenses we have already confirmed the same in the appeal filed by the appellant and therefore, no interference is made in this regard.
10. The appeal of the department is rejected.