TaxTMI 
TaxTMI 
2013 (4) TMI 40
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....ired under TUFs. (2) On the facts and circumstances and as per law, the learned Commissioner of Income-tax (Appeals) was not justified in taking the aforementioned view. (III) Miscellaneous:- (1) The app submits that it is not liable to interest u/s.234B of the Act. (2) The appellant submits that it is not liable to interest u/s.234C of the Act. (3) The app craves to leave, add, alter or vary any of the grounds of appeal. 2.2. Revenue's appeal, ITA 1576/Ahd/2010 - A.Y. 2007-08 In this appeal, the Revenue has raised the following grounds:- (1) On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in restricting the addition made by the A.O. on account of fall in GP of Rs.1,49,24,480/- to 23,36,000/- (2) On the facts and in the circumstances of the case, the learned CIT(A) ought to have upheld the order of the Assessing Officer. (3) It is, therefore, prayed that the order of the CIT(A) may be set-aside and that of Assessing Officer may be restored to the above extent. 3. Facts in brief as emerged from the corresponding assessment order passed u/s. 143(3) dated 30.12.2009 were that the assessee-company is engaged in the b....
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....of 65% in lease rent was quite unreasonable. In the opinion of the AO, the assessee had not given any specific reason for such increase in the lease rent. But the fact remained that the AO had finally applied the GP rate at 9% and since the assessee had adopted 6.62%, therefore the difference between the two GP rates, i.e. 2.38% was accordingly taxed in the hands of the assessee. 5. When the matter reached before the CIT(A), the view taken by him is reproduced below for the sake of clarity. "2.3. I have considered the submission made by the appellant and the observation of the A.O. The main reason for rejecting the books of account is that the assessee has not maintained day-to- day stock register whereas the assessee has stated that it has maintained the stock register as it was subject to excise duty. The same was produced before the A.O. The A.O. has rejected the books of account saying that the valuation of closing stock is not supported with evidences. The appellant on the other hand stated that vide letter dated 30.11.2009 Annexure-VII gave complete details of stock record. The appellant has been able to substantially explain the fall in G.P. rate in manufacturing as se....
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....especially the substantial increase in rent in respect of lease-of water jet looms. Therefore, the increase of lease-rent of Rs.23.36 lacs was held to be covered by the provisions of section 40A(2)(b) of the Act. Because of this part relief now both the sides are before us. 7. From the side of the assessee, ld.AR Mr. R. N. Vepari appeared and at the outset informed that actually the fall in the GP in the manufacturing operation was only 1.92%, therefore the AO has wrongly held that the fall in GP was 2.38%. He has bifurcated the Gross Profit rate of the different operations of the assessee in the following manner:- "Reasons for fall in rate of gross profit rate Asst.Year Turnover Gross Profit Rate Rs. Rs. Combined 2006-07 45,40,57,047 4,81,39,131 13.76% 2007-08 61,39,77,799 4,37,97,172 6.62%Manufacturing 2006-07 43,20,65,348 4,77,32,844 11.05% 2007-08 44,46,57,250 4,06,09,091 9.13% Trading 2006-07 2,19,91,699 4,06,287 1.85% (4.8% of total) 2007-08 16,93,20,549 31,88,081 1,88% (27.5% of total) Actual fall of rate of gross profit in manufacturing operation has been from 11.05% to 9.13% i.e. by 1.92% only." 7.1. The next plank of the argument of the ld.AR was that per se the ....
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.... the assessee has informed that the slight fall in the GP was because of hike in the rate of payment of salary and wages as also there was hike in the cost of the material. Comparative figures were on record to substantiate the hike in the expenses. We therefore hold that the ld.CIT(A) has rightly held that the assessee was able to substantially explain the fall in GP rate in manufacturing activity. On this count, we therefore hold that no addition is required in the hands of the assessee. 9.1. Now we are left with an another issue in relation to the invocation of the provisions of section 40A(2)(b) of IT Act. Since the order of the AO merges with the order of ld.CIT(A), therefore the applicability of the provisions of section 40A(2)(b), as invoked by the CIT(A), must not be overlooked. However, while applying the provisions of section 40A(2)(b), the ld.CIT(A) has not examined the lease agreement, if any, as also the reason for increase in lease-rent from Rs.35.83 lacs to Rs.59.19 lacs. Only this much was stated that 52 water jet-looms. were utilized. There was a mention of a contract on the basis of which the lease-rent was paid, but that fact remained uninvestigated. From the ....