AI Drafter 
TaxTMI 
TaxTMI 
2016 (2) TMI 291
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....f Rule 6DD(e)(ii) read with Circular No. 4 of 2006 by misreading the statement of both the pheriwalas recorded during the remand proceedings in the presence of the appellant that they are the original producers of hides and skins. 3. Briefly stated, the facts of the case are that assessee is manufacturing leather garments and leather goods, for which the basic raw material is hides and skins of animals. The raw material is purchased from butchers and pheriwalas who are growers/producers of hides and skins. These pheriwalas live in remote-rural area which is an unorganized sector. The assessee claimed that no formal sale bills were issued by them, the payments for which were made by the assessee in cash for the purchases made from these butchers/pheriwalas. The Assessing officer observed that assessee had made large number of payments in cash for the purchases made. The assessee claimed that payments were made in cash as per Rule 6DD(e)(ii) of the Income Tax Rules, 1962. The Assessing officer noted that purchases made in cash exceeding Rs. 20,000/- was made in violation of provisions of section 40A(3) of the Act. The total of such cash purchases made during the year under conside....
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....at the above persons also purchased hides and skins from other producers and treated the same before selling to the assessee. Therefore, they are not original producers of hides and skins. We find that a similar issue was before the Hon'ble Calcutta High Court in the case of CPL Tannery (supra), wherein the Assessing officer admitted that the small suppliers of hides and skins did not carry out processing after obtaining the goods from original skin peelers. The Hon'ble High Court upheld the view of the Tribunal and the relevant observations of the Hon'ble High Court are as under:- "It appears that the Tribunal has specifically held as follows:- "We have heard and considered the rival submissions. We find that in the immediately preceding year, in the assessee' s own case, there is an order of this Tribunal accepting the fact that the suppliers of hides and skins are processors and are to be recognized as producers of hides and skins, a consequence of which the benefit of rule 6DD(f)(ii) becomes available to them. The Income-tax Appellate Tribunal in the assessee' s own case, vide I.T.A. No. 2472/Kol/2005 for the assessment year 2002-03 dated J....
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....ain reading of the rule is unambiguous, the principles of interpretation suggests that there is no necessity to derive other meanings of the rule by looking into the dictionary meaning or otherwise. This contention of the Commissioner of Income-tax (Appeals) is not acceptable. The contention of the assessee that he purchased goods from suppliers who are producers of hides and skins, has not been refuted either by the Assessing Officer or by the Commissioner of Income-tax (Appeals). The second contention of the assessee that owing to business expediency, obligation and exigency, the assessee had to make cash payment for purchase of goods so essential for carrying on of its business, was also not disputed by the Assessing Officer. The genuinity of the transactions, rate of gross profit or the fact that the bona fides of the assessee that payments are made to producers of hides and skins are also neither doubted nor disputed by the Assessing Officer. On the basis of these facts it is not justified on the part of the Assessing Officer to disallow 20 per cent. of the payments under section 40A(3) in the process of assessment. We, therefore, delete the addition of Rs. 17,90,571 and groun....
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....gard to the nature of trade, we do not find any justification to take it a reason to interfere. 6. Considering the entire facts and circumstances and circumstance of the present case, we hold that the assessee had made payments to small time venders who supplied hides and skins on vehicles such as cycles, rickshawalas and rehris. The payments were being made to them against kacha bills because the purchases were made from unorganized sectors and the butchers do not have printed bills. It is also clear from the statements of Shri Ram Kumar and Shri Harish Kumar that they confirmed having purchased kucha skins from other butchers and after processing them with salt and mixture they sold these goods to the assessee. In view of the decision of the Hon'ble Calcutta High Court referred to above, we hold that the payments made by the assessee is fully covered within the meaning of Rule 6DD(e)(ii) of the Rules and hence cash payments made to processors of hides and skins are producers within the meaning of aforesaid Rule, and hence no disallowance u/s 40A(3) of the Act is called for. Accordingly, we delete the addition. 7. Ground No.3 of the appeal reads as under:- 3. Th....
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.... in the trading account by the appellant in the chart (supra). 4.7 It would be fair and reasonable to apply the GP rate of 11.19% on the gross sales of Rs. 12,23,72,378/- as shown by him in the preceding year. In the succeeding year also the GP rate is 11%; Gross profit by applying average GP rate at the rate of 11% works out to Rs. 1,34,60,962/- as against Rs. 1,20,80,282/-declared by the appellant. Accordingly, an addition of Rs. 13,80,680/- is made to the income of the appellant on account of low GP rate as against the addition of Rs. 62,75,575/- made by the A.O. The appellant gets a relief of Rs. 48,91,895/-. In the result, this ground of appeal is partly allowed." 10. We have heard the rival submissions. Shri Rohit Goel Ld. Counsel for the assessee submitted that during the year under consideration the sale has increased to Rs. 1223.72 lakhs as compared to the sale of Rs. 504.43 lakhs during the immediately preceding year. Besides selling leather garments and leather goods, assessee is also engaged in tanning (job work) of raw leather as per the requirements of the clients. He further stated that there is increase in the sale almost to the tune of 242.60% as compar....
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....ways remains the same but the rates changes with reference to the sizes and quality which is the material fact in this line of trade because the smaller sizes the finished goods are not of good quality in this line of trade. As we have observed hereinabove, the Assessing officer has not invoked the provisions of section 145 of the Act. The books of account of the assessee are audited and the auditors have not given any adverse remarks. The Assessing officer has computed the suppressed sales without pointing out any discrepancy in the books of account regularly maintained by the assessee. It is observed that CIT(A) has allowed a substantial relief to the assessee but we are of the opinion that there is no justification in sustaining the addition of Rs. 13,80,680/-, particularly when it is not the case of the Assessing officer that the assessee has not declared the true profits and the books of account are not reliable as he has not rejected the book results. Thus, considering the entire facts of the present case and also settled legal position, we do not find any reason to sustain the addition of Rs. 13,80,680/- and accordingly we delete the same and allow this ground of appeal. ....
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....he grade and length of the leather/skins, shine of the skin etc. Considering the entire facts and circumstances of the present case, we observe that on the basis of certain bills, the Assessing officer came to the conclusion that the assessee was selling the goods to its sister concern at a lower price as compared with the sales made to other parties. It is also noticed that during the remand proceedings the assessee submitted two bills having bill Nos. 716 dated 25.10.2008 in which material was sold to the sister concern @ 4.50 per Sq DM and another having bill No. 719 dated 15.10.2008 vide which material was sold to M/s Indiggo @ 3.15 per Sq. DM. According to the assessee the rate of goods sold to sister concern is higher than the goods sold to the other parties. Thus, considering the entire facts and circumstances of the case, we are of the view that there is no justification in sustaining the impugned addition. The Assessing officer cannot dictate terms to the assessee as to how such profit is to be earned. There are no basis for making the impugned addition. In the result, the appeal is allowed partly. ITA No. 706/Chd/2013 15. Vide ground No. (i) and (ii) of the appea....