2014 (1) TMI 907 - AT - Income Tax

Tribunal upholds Revenue's appeals challenging evidence, gross profit ratio application, and specific additions

The Tribunal dismissed three appeals by the Revenue challenging the admission of additional evidence, application of gross profit ratio to suppressed job ... Admission of additional evidence – Calculation of suppressed income – AO did not get the opportunity to offer comments as per Rule 46A of the Rules - Held that:- There was no violation of the provision of Rule 46A could be shown by the Revenue – Decided against Revenue. Error in application of GP ratio - The CIT(A) has passed a well considered speaking order on the issue - the GP rate has been applied as declared by the assessee on accounted job work on the figure of suppressed job charges for all three years in appeal – The GP rate applied by the CIT(A) on the suppressed job charges amounts to applying of net profit rate as no further deduction of expenditure was allowed to the assessee - There was no justification for applying the GP rate of 38.77% on the figure of suppressed job charges, as canvassed on behalf of the Revenue - the entire job charges could not be subjected to the tax, as all the direct expenditure, which are essential part for earning gross job receipts charges have to be allowed to the assessee to arrive at a realistic and reasonable figure of profit on the suppressed job charges received by the assessee – Relying upon Commissioner of Income-tax Vs President Industries [1999 (4) TMI 8 - GUJARAT High Court] – there was no infirmity in the order of the CIT(A) in partly allowing the ground of the appeal of the assessee, and estimating the GP rate on the suppressed job charges at GP declared on accounted job work by the assessee – Decided against Revenue. Issues Involved:- Admission of additional evidences without providing AO an opportunity- Application of gross profit ratio to suppressed job work receipts- Deletion of specific additions for different assessment yearsAnalysis:1. Admission of Additional Evidences: The Revenue contended that the CIT(A) erred in admitting additional evidences for calculating suppressed income without giving the AO an opportunity, violating Rule 46A of the I.T. Rules. However, the Tribunal found no violation of Rule 46A and dismissed the Revenue's appeal on this ground.2. Application of Gross Profit Ratio: The Revenue challenged the CIT(A)'s application of a gross profit ratio of 28.44% to suppressed job work receipts, arguing that the GP ratio from the trial balance sheet was 38.77%. The Tribunal noted that the CIT(A) had justified applying the GP rate declared by the assessee on accounted job work to suppressed job charges. It emphasized that considering the entire suppressed job charges as income would lead to unrealistically high GP percentages, and that direct expenditures essential for earning gross job receipts needed to be allowed for a reasonable profit calculation. The Tribunal upheld the CIT(A)'s decision, confirming the estimated GP rate on suppressed job charges.3. Deletion of Specific Additions: The Revenue's appeal regarding the deletion of specific additions for different assessment years was found to be covered by another ground of appeal and required no separate adjudication. The Tribunal dismissed the COs of the assessee for all three years as they were supportive of the CIT(A)'s order.In conclusion, the Tribunal dismissed the three appeals by the Revenue and the three cross-objections by the assessee, upholding the CIT(A)'s orders for the assessment years in question.