TaxTMI 
TaxTMI 
2016 (7) TMI 444
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....einafter called "the Tribunal") read as under:- "1. The Commissioner of Appeals-21, erred in upholding addition of Rs. 1,38,47,120/- (estimating gross profit of 11.06%) against addition of Rs. 3,45,63,127/- made by the Assessing Officer. The said addition may be deleted." 3. The brief facts of the case are that the assessee company is engaged in the business of manufacturing of equipments/machineries which are used by Pharmaceuticals and allied industries. 4. The A.O. observed from the Profit and Loss Account for the previous year relevant to the assessment year 2007-08 that the assessee company has sales of Rs. 20.58 crores and gross profit of Rs. 6.55 crores , whereas for the previous year relevant to the assessment year 2008-09, the assessee has sales of Rs. 19.01 crores and gross profit of Rs. 2.6 crores. The gross profit ratio of the assessment year 2007-08 worked out to be 31.82% , while for the assessment year 2008-09, it worked out to be 13.67% and hence there was a drastic fall in GP ratio for assessment year 2008-09 vis-à-vis for assessment year 2007-08. The details were called by the AO from the assessee to enquire about this drastic fall in GP rati....
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....were not based upon documentary evidences. It was also held by the AO that with respect of sales of spare parts at the fag-end of the previous year to its sister concern , thereby reducing the stock to Nil, the details were not available in the stock register and the assessee did not furnished the details before the AO. It was also observed by the AO that the assessee booked sales commission of Rs. 99 lacs on sales of Rs. 19.01 crores during the previous year relevant to the impugned assessment year, while in the immediately preceding assessment year the sales commission was only Rs. 1.08 lacs on sales of Rs. 20.58 crores. Further it was observed by the AO that it is pertinent that in the impugned assessment year under appeal, the sales to sister concern was Rs. 9.67 crores on which no sales commission would be payable. It was observed by the AO that the assessee has claimed commission of Rs. 99 lacs on sales of Rs. 9.34 crores to outside parties . No details of sales commission were submitted by the assessee including the names and address of the parties to whom sales commission is payable, nor the assessee paid sales commission during the previous year and the said sale commis....
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....l cost taken by the AO while computing gross profit during assessment proceedings. It was also verified by the AO in remand report proceedings and found to be correct by the AO , whereby it was observed by the AO in remand report proceedings that the AO has taken only material cost in his computation of gross profit margin in the assessment proceedings and hence gross profit margin is higher. The AO in remand report proceedings submitted that with respect to issue regarding the inclusion of other cost as described above for arriving at the gross profit, the same may be decided by learned CIT(A) as per merits of the case. The remand report submitted by the AO to the learned CIT(A) was forwarded by the learned CIT(A) to the assessee for its comments. The assessee submitted before learned CIT(A) that the AO has accepted the contentions of the assessee in remand report proceedings and no discrepancies have been reported in remand report and hence the additions are now not sustainable. It was submitted that the assessee is a respectable large capital goods manufacturing unit, managed and run by professionals. The Revenue has not made any such additions in the assessment orders for....
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....l year 2007-08 after excluding transfer of components and spares to Pharmalab India Private Limited at cost of Rs. 6.49 crores , the sales from manufacturing products comes to Rs. 12.52 crores. The learned CIT(A) observed that there is a huge difference between the gross profit margin of the two years whereby gross profit margin in financial year 2006-07 was 31.82%, while for financial year 2007-08 it was 20.67% and there is a huge difference between these two on similar business on similar items of manufacturing activities of the assessee. The learned CIT(A) applied the difference between the two years gross profit margin i.e. 11.06% to the sales of products from manufacturing activities of Rs. 12.52 crores during the impugned assessment year and added Rs. 1,38,47,120/- to the income of the assessee and gave relief with respect to the balance addition made by the AO, vide appellate orders dated 23.12.2013 passed by learned CIT(A). 7. Aggrieved by the appellate orders dated 23.12.2013 passed by the learned CIT(A) , the assessee filed second appeal with the Tribunal. 8. The learned counsel for the assessee reiterated the submissions as made before the authorities below. It was....
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.... DR on the other hand relied upon the decision of learned CIT(A) and submitted that the additions made by learned CIT(A) be sustained. It is not brought on record that the Revenue is in appeal before the Tribunal against the relief's granted by the AO. 10. We have considered the rival contentions and perused the material on record including case laws relied upon. We have observed that the assessee is a company engaged in the business of manufacturing of equipments/machineries which are used by Pharmaceuticals and allied industries. The AO has made additions on the grounds that the gross profit margin earned during the year being lower than the gross profit margin of immediately preceding year and the additions were made to the income of the assessee by applying the gross profit margin of 31.82% to the sales of the previous year relevant to the assessment year under appeal , based on gross profit margin earned during the preceding year. The assessee contended that in respect of some items, the sale price to outside parties is inclusive of accessories being supplied along with the manufactured products as well is inclusive of installation and commissioning whereas in the case of s....