2015 (9) TMI 175 - AT - Income Tax

Tribunal confirms adjustments to Gross Profit rate and unexplained loans, Revenue's appeal dismissed

The Tribunal upheld the CIT(A)'s decisions in a case involving the reduction of the Gross Profit rate on turnover without a valid basis and the deletion ... G.P. addition - CIT(A) reducing the G.P. rate on the turnover - Held that:- It is undisputed fact that the assessee did not produce complete books of account with vouchers for verification by the assessee as the assessment was made U/s 144 of the Act. However, the ld CIT(A) had called for remand report from the Assessing Officer, who has proposed the G.P. rate after verification of the certain bills @ 30.73% as against 25.35% applied by the Assessing Officer. However, the ld CIT(A) found defect in the computation of G.P. rate, which was calculated on purchases bill but as per accountancy, the G.P. rate is always calculated on sale, which has rightly been applied by the ld CIT(A). After examining the defect, the ld CIT(A) came to conclusion that 20.72% G.P. rate is applicable in assessee’s case on enhanced sale. Therefore, the ld CIT(A) has thoroughly analysed the remand report and assessee’s submissions, which has not been controverted by the ld DR. Therefore, we uphold the order of the ld CIT(A). - Decided against revenue Unexplained loan - CIT(A) deleted addition - Held that:- CIT(A) admitted the additional evidence even without passing order on admitting the additional evidence in his order. The assessee had not furnished any evidence before the Assessing Officer as he was non-cooperative at the time of assessment proceedings. Even creditors are assessed with the same Assessing Officer. It is settled law that the assessee has to furnish the required details with confirmation before the Assessing Officer for any claim. However, the technical defects found in the order of the ld CIT(A) is waived as minor son’s income is clubbed in the hands of assessee himself and explanation for assessee’s mother loan had been filed, therefore, we do not intervene in the order of the ld CIT(A) on technilities. Accordingly, we uphold the order of the ld CIT(A). - Decided against revenue Issues involved:1. Reduction of G.P. rate on turnover without valid basis2. Deletion of addition on unexplained loansAnalysis:Issue 1: Reduction of G.P. rate on turnover without valid basisThe appeal by the Revenue was against the reduction of the Gross Profit (G.P.) rate on turnover without a valid basis, resulting in the deletion of an addition of Rs. 4,85,625. The assessee, engaged in a retail saree shop business, had not produced complete books of account for verification despite multiple notices. The Assessing Officer estimated sales and applied a G.P. rate based on the previous year's figures. The CIT(A) partially allowed the appeal, adjusting the G.P. rate to 20.72% and confirming an addition of Rs. 3,25,950 while deleting the remaining amount. The Revenue challenged this decision, but the Tribunal upheld the CIT(A)'s order, emphasizing that the G.P. rate should be calculated on sales, not purchase bills.Issue 2: Deletion of addition on unexplained loansThe second ground of appeal concerned the deletion of an addition of Rs. 14,39,589 on account of unexplained loans. The assessee had unsecured loans in the names of Smt. Lalita Sharma and Master Vaidik Sharma. The Assessing Officer made the addition under Section 68 of the Income Tax Act as the source of the loans was not adequately explained. However, the CIT(A) allowed the appeal, noting that Smt. Lalita Sharma had a legitimate source for the loan and Master Vaidik Sharma's income was clubbed with the assessee's income. The Revenue contested this decision, arguing lack of opportunity for the Assessing Officer. The Tribunal upheld the CIT(A)'s decision, considering the provided explanations and the clubbing of minor son's income.In conclusion, the Tribunal dismissed the Revenue's appeal on both issues, affirming the CIT(A)'s decisions on the grounds of G.P. rate calculation and unexplained loans.