TaxTMI 
TaxTMI 
2015 (3) TMI 440
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....e of 1.75% would suffice, even when the G.P. rate of 1.98% applied by the A.O. was on the basis of the past history of the appellant. (3) The CIT(A) has erred in assuming that the G.P. rate of 1.75%, adopted by him was justified and was in proposition to the increase in turnover." Grounds in Cross Objection "1. The Learned CIT(A) has erred on facts and in law in confirming the action of A.O. by invoking the provision of Section 145(3) and rejecting books of account of the assessee. 2. The Commissioner of Income Tax (Appeals) has erred on fact and in law in confirming the trading addition of Rs. 2,80,383/- by applying the G.P. rate of 1.75% as against the G.P. rate of 1.70% declared by the assessee." Grounds in Revenue Appeal for A.Y. 2009-10 "On the facts and in the circumstances of the case, the Learned CIT(A) has erred in:- (1) The CIT(A) has erred in restricting the trading addition of Rs. 47,07,724/- made by the A.O. to Rs. 8,82,962/-, even while upholding the application of section 145(3), in the facts and circumstances of the case. (2) The CIT(A) has erred in holding that the G.P. rate of 1.5% would suffice, even when the G.P. rate of 1.98% applied by ....
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....on the basis of information passed on by the accountant. Year vise yield of oil and the G.P. was low in comparison to last year as reflected by following chart: S.No. A.Y. Turn over/receipts Gross Profit GP Rate 1. 2007-08 33,62,70,234/- 66,74,372/- 1.98% 2. 2008-09 56,53,52,743/- 96,13,290/- 1.70% 3. 2009-10 79,68,25,598/- 1,10,69,422/- 1.39% In view of these infirmities, the Assessing Officer proposed to reject the books of account of the assessee. 2.1 The assessee furnished following explanation in this behalf: "i. Your goodself has mentioned in the notice that assessee has not maintained the quality wise stock register for seed. Here we wish to submit that all the mustard seeds are of same type. Therefore, it is not possible to separate the seeds in different qualities. In respect of yield we wish to submit that every lot purchased is sent for testing at an independent laboratory. We have already submitted the few test reports for every month. From the test reports your good self can verify that yield as books of accounts are matched with the laboratory test reports. Therefore, when assessee has main....
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....ng of oil are carried out through machines, therefore, substantial portion of electricity is also utilized in packing of oil. The electricity expenses reduce with the increase in production which is evident from the facts. Further, there is certain amount electricity in the office and factory, which is fixed in nature. Hence, production shown by the assessee is correct and should not be compared with the electricity consumed which was used for various purposes. Further, we have already submitted that our yield was supported by independent test laboratory. (vi) Your good self is of the view that nil shortage is not possible during the process of packing and forwarding. In this regard, we are to say that packing of oil is processed through machines, therefore, there are very less chances for shortage. Further if any waste oil is refined and reused. (vii) Your good self has asked about the reasons for the excess of production of mustard oil and cake produced over the mustard seed consumed. In this regard we are to say that the assessee is engaged in production of oil from mustard seeds. When seeds are processed oil is produced. Further, a byproduct mustard cake is also produced ....
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....nt is against the part relief given to the assessee. In A.Y. 2009-10, the assessee has further agitated the grounds about disallowances of PF amount and telephone expenses. 5. Learned Counsel for the assessee Shri P C Parwal contends that the assessee maintains regular books of account, which are duly audited. The learned Assessing Officer has not found any specific defect in the books of the assessee. (i) In absence of demonstration of any specific defects, the books of account cannot be rejected; the act of rejection of books of account is a serious matter and cannot be done in a casual or routine manner. The rejection of books can be recoursed only and only when specific defects are demonstrated which impede the ascertainment of assessee's profits. (ii) The learned Assessing Officer and learned CIT(A) both have emphasizes the reason of reduction in GP rate as compared to earlier years as their main reason for rejecting the books of account. (iii) The assessee's nearly 80% dealings are in trading of mustards oil and 20% of crushing of mustard seeds for production of edible mustard oil and its byproduct oil cake. The assessee's business is covered by Essent....
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....s and therefore, no stock record for the same is maintained. (viii) During the course of assessment proceedings, the assessee explained that 80% of its mustard oil is by way of trading sale, qua which no defects whatsoever have been found i.e. in respect of the traded mustard oil. Therefore, any inference could be drawn vis-a-vis manufactured oil and not the traded oil which is simply bought and sold. Surprisingly, both the authorities have not appreciated this aspect and applied the GP rate of 1.98% across the board on the traded mustard oil also. 5.1 It is pleaded that the books of account of the assessee have been rejected without any justification; without pointing out any specific defects; the alleged defects do not exist as the furnishing of such record is nearly impossible. It is neither a trade practice nor requirement of ICAI standards and is impossible to maintain. Thus the books of accounts have been willy-nilly rejected without any justification. It has not been appreciated that on 80% of traded mustard oil no such defects are pointed out. Reliance is placed on the following case laws:- (i) ACIT Vs. Vijay Solvex Limited ITA No. 676/JP/2011 A.Y. 2006-07 dated 21....
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....ies and methods of accounts as in earlier and subsequent years when the assessee's books of account have been upheld. (ii) The assessee's business model consists of 80% of trading of i.e. purchase and sale oil and 20% of manufacturing of oil. These facts have not been disputed by the ld. DR. (iii) Being a single commodity manufacturer, the assessee cannot be expected to stop the plant as and when a new lot of mustard seed is subjected to crushing as the manufacturing of mustard oil as a continuous process, this is also not disputed by the department. In these circumstances, it is unreasonable to expect from the assessee to shut the plant for crushing of every lot of mustard seed, the yield and maintain impossible day to day, lot wise stock in this behalf. Thus, the corresponding compliance insisted by the learned Assessing Officer is beyond the business reality and not a prevalent trade practice. (iv) Otherwise, the assessee has maintained proper day to day stock register of the inward and outward day to day stock of mustard seed, and mustard oil; traded as well as manufactured. We are unable to see any infirmity in the record and book keeping of the assessee in both ....