TaxTMI 
TaxTMI 
2012 (1) TMI 268
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....8. The assessment was completed on a total income of Rs. 2,88,74,790/-. During the assessment proceedings, the AO noticed that assessee ;has shown GP of Rs. 3,17,94,415/- on total sales of Rs. 36,04,94,486/-. The rate comes to 8.81% as compared to 10.13% shown in earlier year. The AO observed that assessee has not maintained quantitative details of goods and also not able tp submit inventory of opening and closing stock. The AO further observed that assessee was not able to produce the wages register. Vouchers were verified for payment of job work charges and out of this, Rs. 11,85,602/- were found to have been paid on self made vouchers. Total expenses on account of job work charges was claimed at Rs. 1,20,41,420/-. By observing these facts, the AO found that provisions of section 145(3) are applicable on the facts of the present case. The assessee was required to give reasons for increase in raw material price for last three years and increase in sale price per unit. The AO observed that while the sale prices per unit transfer had gone up by 25%, the assessee was unable to give exact details of proportional increase in rise in prices of raw material components. Therefore, AO appl....
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....ese two raw material is 63% in which prices increase but Ld. A.O. has not consider this price increase factor and ignore this factor of price increase in Raw Material. The during the year under consideration sales of the transformers were made for the following tender awarded to the unit. Tender No. KVA Rate per Transformer Amount Tender No. TN 318 awarded in the F.Y. 2005-06. 63 54967/- 4,19,58,535.00 Tender No. TN 225 awarded in the F.Y. 2005-06 25 28000/- 2,24,19,526.00 Tender No. TN 371 awarded in the F.Y. 2007-08 25 34158/- 29,54,86,782.00 Further I would like to state that during the year under consideration no any tender was awarded to assessee but supplies are continue against Tender No. TN 371. The Unit was established in the year 1983 and since than assessee is supplying Transfomers to RSEB. Low Gross profit rate That Gross profit rate for last three years of assessee is as below :- F.Y. 2005-06 2006-07 2007-08 Rate of G.P. 13.88% 10.13% 8.81% Increase in sales prices vis a vis cost of finished product are as under :- Particulars F....
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....he material on record, the ld. CIT (A) allowed the appeal of the assessee in part. After considering the issue in detail, the ld. CIT (A) found that though provisions of section 145(3) are applicable, however, the GP rate applied by AO was on higher side. Accordingly, the AO was directed to apply rate of 10% on the sales shown by assessee against GP rate of 12% applied by AO. 6. Now both are in appeals here before the Tribunal. 7. The ld. Counsel of the assessee filed written submissions. 8. On the other hand, the ld. D/R strongly placed reliance on the order of the AO. Attention of the Bench was drawn on page 6 of the order of the AO. 9. After considering the submissions and perusing the material on record, we find that there is no substance in the appeal of the department. However, assessee deserves to succeed in part. We noted that the ld. CIT (A) has given a finding that stock register was not maintained and, therefore, valuation of closing stock remained unverifiable. Since this is an important factor for deducing the valuation of closing stock, therefore, in our view, the invocation of provisions of section 145(3) was correct. Now the question arises is decline in....
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....imilarly regarding payment of commission to S/Shri Mukesh Rawat, Rajesh Rawat and Navratan Kumar Rajoria, the AO held that assessee had not provided any agreement entered into with these parties and he was not able to substantiate for what actual purpose the money had been paid to them. Accordingly, the entire commission payment was disallowed by AO. 14. The detailed submissions have been made before ld. CIT (A) which are tabulated in the order of ld. CIT (A) at pages 11 to 13, are as under :- ""Commission Paid to specific persons U/s 40A2 (b) `Regarding commission paid to commission agent is reasonable or justifiable is depends on the prevailing trend and market conditions of the availability of the goods so required to the unit and also depend on quality aspects of the goods so purchases through commission agent. The quality of the transformer depends upon its energy saving i.e. the losses which can be reduced when the purest form and high quality of metal i.e. aluminum and oil from which it is manufactured. If the metal is pure and of high quality grade the resistances of that metal are low hence the losses of transformer would be low resulting into very high and eff....
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....t efforts of Sh. Hariom Gupta copies of purchases bills and are than rate quotation is enclosed herewith for your ready reference hence commission paid to Mr. Hariom Gupta is reasonable and as per prevailing market rate. The Ld. A.O. has stated in his order. That transformer oil is easily available from HPCL and IOC but it is to inform you that these i.e. IOC, BPCL and HPCL are not selling transformer oil hence all the transformer manufacturers are obtaining this transformer oil from other refineries not from HPCL and IOC hence commission paid is justified and reasonable and incurred for the reduction of prices of Raw material and for business purpose only. VIKRAM GUPTA That commission was paid to Vikram Guptafor procuring good quality of aluminum wire rod at low prices than available in market the fair rate prevailing in market for aluminum wire rod is 138 to 140 per kg. but aluminum wire rod purchased through Mr. Vikram Gupta was purchased @ 128.00 per kg. a copy of quotation and purchases bill is enclosed for your ready reference also in market so many kinds of rod are available yet quality and need of the assessee is the foremost object and experience person c....
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....that similar payments were made in earlier years and there was no disallowance. Accordingly he allowed this ground of the assessee. 16. After considering the orders of the AO and ld. CIT (A) on which reliance has been placed by respective parties, we find that ld. CIT (A) was justified in allowing the claim of the assessee. It is seen that ld. CIT (A) has verified the accounts and confirmation of commission agents individually. The explanation of all the commission agents individually has been tabulated in the order of ld. CIT (A) at pages 12 and 13. It has been explained what services were rendered by commission agents and how they helped the assessee in getting the work done. Therefore, without going into detail further, we hold that the findings of ld. CIT (A) are finding of fact, which remained uncontroverted as department has placed reliance on the order of AO only. Accordingly, we confirm the order of ld. CIT (A) on this issue. 17. Remaining issue in the appeal of the department is against reducing the disallowance made under section 40a(ia) from Rs. 17,60,063/- to Rs. 90,000/-. 18. The AO observed that assessee had made payment of Rs. 17,60,063/- to Clearing & Forwa....