TaxTMI 
TaxTMI 
2014 (4) TMI 619
X X X X Extracts X X X X
X X X X Extracts X X X X
....anufacturing of Ceramic Tiles. Assessee filed its return of income for A.Y. 2005-06 on 14.10.2005 showing total income of Rs. NIL after claiming set-off of Business Loss of Rs. 9,61,911/-. Assessee thereafter filed revised return of income on 01.09.2006 showing total income of Rs. NIL but after claiming set-off of Business Loss of Rs. 15,81,792/-. Assessment was completed under section 143(3) vide order dated 28.12.2007 and the total income was determined at Rs. 17,20,903/-. Thereafter the assessment was reopened u/s. 147 of the I.T. Act and the Assessment was framed under section 143 (3) read with section 147 of the Act vide order dated 28.12.2011 and the total income before adjustment of brought forward loss and depreciation was determined at Rs. 92,20,231/-. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A). CIT(A) vide consolidated order dated 27.12.2012 for A.Y. 05-06 & 06-07 granted partial relief to the Assessee. Aggrieved by the aforesaid order of CIT(A), the Revenue is now in appeal before us and has raised the following ground. "1. The ld. CIT(A) has erred in law and on facts in granting relief of Rs. 38,41,531/- and directing t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts have been used for the purpose of making cash payments for the various expenses associated with manufacturing activity. He was of the view that since there was no firm basis for arriving at a proper ascertainment of gross profit in view of the fact that Assessee was unable to furnish details of all the unaccounted expenses incurred by it, a rational estimate in respect of G.P. needs to be made. He thereafter on the basis of the suppression of MRP of the quantity during the year and as tabulated on page 11 of the order determined the unaccounted cash receipt on sale at Rs. 1,87,48,320/- (on the basis of boxes sold i.e. 937416 x unaccounted cash receipt of Rs. 20/- per box) and thereafter applying the G.P. rate of 40% on it made an addition of Rs. 74,99,328/- as unaccounted income earned on account of suppression of MRP. Aggrieved by the aforesaid addition made by the A.O., Assessee carried the matter before CIT(A). CIT(A) after considering the submissions made by the Assessee restricted the addition on the basis of net profit by holding as under:- 4.4. I have considered the fact of the case and the submission of Ld. AR. During the appellate proceedings, the AR....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d some are not, the GP to be adopted for the purpose of computing profits on the unaccounted receipts needs to be suitably adjusted. It is a case where majority of raw material and other manufacturing expenses accounting for 60-65% of manufacturing cost and are recorded in books. The GP rate, to be adopted for computing profits generated to the assessee company out of its unaccounted receipts, has to be higher than the normal GP in light of the facts that expenses like a portion of the raw material cost, entire electricity and fuel costs and a portion of the labour costs have already been claimed in the normal books of accounts. Since there is no firm basis for arriving at a proper ascertainment of such GP in light of the fact that the assessee is unable to furnish details of all unaccounted expenses incurred by it, although evidence of such expenses has been noted by the DGCEI in their report, a rationale estimate is made in relation to the GP to be adopted in respect of the unaccounted receipts of the assessee. Considering the totality of the facts, GP rate of 40% seems reasonable in this case and accordingly the same is applied on unaccounted cash received is taxed as unaccounte....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 4.6. Considering above facts, I am of the view that the appellant has received cash on suppression of sales and earned excess amount and used for the purpose of making cash payment for the various expenses associated with the manufacturing and other activities. The Net Profit ratio which has been declared in the books of accounts does not reflect the proper profitability of the business of the appellant company in the respective years. The net profit declared by the appellant in the books of accounts in the respective years is abysmally low. As the books of accounts of the appellant have been rejected, the net profits are to be adjusted to arrive at the real profitability of the appellant company as the appellant company has not taken other factors to arrive at the Net Profit in the year under appeals. Since, there is no firm basis for arriving at a proper ascertainment of such NP in light of the fact that the appellant is unable to furnish details of unaccounted expenses incurred by it before the AO and before me, evidence of such expenses has been noted by the DGCEI in their report, a rationale working is required to be made in this relation. For this purpose the ratio is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0 x 19.51%) in asst. year 2005-06 and Rs. 30,88,709/- (2,03,87,520x15.15%) in assst. Year 2006-07 respectively are confirmed as unaccounted income earned on account of suppression of MRP. The related grounds of appeal are adjudged accordingly. 6. Aggrieved by the aforesaid order of CIT(A), the Revenue is now in appeal before us. The revised ground of the Revenue reads as under:- 1. The ld. CIT(A) has erred in law and on facts in directing to adopt net profit @ 15.15% as against 40% GP adopted by the Assessing Officer on the unaccounted sales of Rs. 2,03,87,520/- received by the assessee thereby allowing a relief of Rs. 50,66,299/- to the assessee out of the addition of Rs. 81,55,008/-. 2. The ld. CIT(A) failed to appreciate the fact that the expenditure incurred on the unaccounted sales by the assessee over and above the MRP disclosed by it has already been accounted for in the regular books of accounts. 3. The ld. CIT(A) also failed to appreciate the fact that the assessee failed to furnish any evidence in respect of the expenditure claimed to have been incurred in respect of such accounted sales. 7. Before us, the ld. ....