TaxTMI 
TaxTMI 
2013 (9) TMI 1129
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....whereas, the AO had assessed the total income at Rs. 82,68,118/- for AY 2003-04, Rs. 1,56,73,585/- for AU 2004-05, Rs. 70,81,056/- for AY 2006-07 and Rs. 59,76,624/- for AY 2009-10, by making certain additions based on the theory of percentage of net profit over gross profit. 3. While computing the taxable incomes of the assessee for the years under reference, the AO had made additions of Rs. 1,12,848/-, 36,15,485/-, 4,83,736/- and Rs. 2,57,014/-, on the basis of the inferences drawn from the variations in the ratio of net profits to that of gross profits of the assessee, for the three assessment years, vi.z, 2003-04, 2004-05 and 2005-06. According to the AO the gross profits of the assessee were in the range of 5.472, 10.33 as against the net profit of 5.25 to 6.51 for the above three assessment years and the ratio of net profit to the gross profit had been shown to be in the range of Rs. 59.47 to 95.83. The average of net profit to the gross profit ratio had been worked out to 77.28 for the three years put together and the additions were made based on the deficit of such ratio of net profit to gross profit, for the respective assessment years vis-àvis the average of the r....
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....as well as Income Tax Act, with all the purchases and sales are vouched and the quantitative particulars maintained in excise records. It was also submitted by the assessee that the assessments were invariably completed u/s 143(3) and the returned incomes were accepted without making any addition. The assessee further contended that the assessments for the years under consideration were completed u/s 153A, in pursuance to action u/s 132 and no information for making such additions were found during the search proceedings. It was argued by the assessee that provisions of section 145 are not applied, no specific defects were pointed out any book results were not rejected, as such, there is no justification for the AO for making the addition on the basis as adopted by him and cannot stand any reasonable test of law, much less under the provisions of the IT Act, 1961. According to the assessee, the discretion exercised by the AO is not warranted on the facts of the case of the assessee, as no comparable instance had been brought out on record. It was contended that the basis of calculation, as adopted by the AO are imaginary and without any record to the aspects of relevant to direct a....
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....standards as prescribed. Further, he observed that the AO had not shown any defects in the books or method of accountancy adopted by the assessee and books are not rejected so as to estimate profits of business. Rather such estimation is resorted to superfluous methods of percentage of net of gross, which is not ordinarily heard in the accounting languages/practices. Further, the CIT(A) observed the additions made on theoretical basis, based on surmises and conjectures are desired to be desisted in search related cases with no adverse information found, in support of such estimation/method. 9. In view of the above observations and following the decision of the Special Bench of ITAT, Mumbai in the case of All Cargo Global Logistics & Others (ITA No. 5018 to 5022 & 5095/m/2010, the CIT(A) held that in absence of any incriminating evidence found against the assessee in proving that unaccounted incomes were generated by suppression of profit, the AO is not justified in resorting to estimation and arithmetical assumptions and, therefore, the additions made based on percentage of net over gross adopted by the AO are held to be without any basis that can be justified on factual or legal ....
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....No. 53/2011 and others vide judgment dated 24th May, 2013. 3. JCIT Vs. M/s Spectrum Pearls & Exports Pvt. Ltd. in ITA Nos. 2107 to 2113/Hyd/2011 for AYs 2003-04 to 2009-10 order dated 04/04/2012. 13. We have heard the arguments of both the parties, perused the record and have gone through the orders of the authorities as well as the decisions cited. Additions have been made by the AO for the reason that the assessee has not admitted the normal profits from its manufacturing activity as compared to the other years in consideration and has understated the incomes, for the respective years on the basis of the inferences drawn from the variations in the ratio of net profits to that of gross profits of the assessee. On the other hand, the CIT(A) before directing the AO to delete the additions made gave categorical findings that "the AO has not shown any defects in the books or method of accountancy adopted by the assessee and books are not rejected so as to estimate the profits of business. Rather such estimation is resorted to superfluous methods of percentage of net of gross, which is not ordinarily heard in the accounting languages/practices. Further, the additions made on theoret....