TaxTMI 
TaxTMI 
2016 (5) TMI 1288
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....g Officer u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") vide order dated 14/12/2011 and total income was determined at Rs. 64,68,400/-. Aggrieved by the order of the AO, assessee carried the matter before the ld.CIT(A)-Valsad, who substantially granted relief to the assessee vide order dated 30/03/2012 (in Appeal No.CIT(A)/VLS/361/11-12). Aggrieved by the order of the ld.CIT(A), the Revenue is now in appeal before us and has raised the grounds which have been revised on 15/04/2015 and the revised grounds read as under:- 1. On the facts and in the circumstances of the case, and in law, the Ld.CIT(A) has erred in restricting the addition by directing the AO to adopt NP @ 2% of the turnover instead of disallowance made by AO of Rs. 37,61,045/- being 15% of the total URD purchases of Rs. 2,50,73,632/- treated as non-genuine and unverifiable. 2. On the facts and in the circumstances of the case, and in law, the Ld.CIT(A) has erred in deleting the addition of Rs. 22,29,345/- made by the AO on account of unexplained sundry creditors. 2.2. In Cross Objection, the assessee has raised the following grounds:- 1. On appreciation of ....
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.... the total purchases from Unregistered Dealer (URD purchases) as being inflated and unverifiable and accordingly disallowed an amount of Rs. 36,61,045/-. Aggrieved by the order of the AO, assessee carried the matter before ld.CIT(A), who vide order dated 30/03/2012 granted partial relief to the assessee by holding as under:- "6. DECISION :- I have perused the findings of the AO and the submissions made before me by the appellant. The appellant is a trader in waste paper and is purchasing the Waste paper and other similar scraps from small time vendors who are popularly known as raddiwallas. Such raddiwallas collect waste items from different locations in and around Vapi Industrial town and finally sold the waste paper so collected to the middleman traders like the appellant. The appellant purchase such waste paper collected on a day to day basis, accumulate the same in quantities and thereafter sell the same to the end users i.e. paper mills. The paper mills purchases these items in quantities from the market consisting of the traders like the appellant at the first level and raddiwallas in the second level. The purchase price of waste paper is fixed by the Gujarat Paper M....
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....d the gross profit and made an addition of 0.5% to 0.75 % of the turnover as income on the basis of same facts and issues in dispute. 6.3. The appellant had furnished quantitative details of purchases and stock along with the tax audit return and has disclosed a sum of Rs. 17,36,499/-as gross profit (G.P.) which works out to 7% of the total turnover. On consideration of the nature of the business the assessing officer doubted the profitability of the trading results of the appellant. As a result the AO completed the assessment by disallowing a portion of the purchase value of the appellant. I am of the considered opinion that waste paper collection and supplying the same to the traders like the appellant are carried on by small time collectors who belong to unorganized poor section of the society. I agree with the AO to the extent that the traders like the appellant should comply with the provisions of the income tax law in maintenance of books of account and other particulars required for the purposes of assessment. In this case considering the peculiar nature of the business and the modus operandi required for carrying out the business, the inferences have to be derived ....
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....used the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) while deciding the issue in favour of assessee has given a finding that though the AO has doubted the purchases but has not brought on record any instance of bogus or inflated purchase and has also not doubted the sales figure disclosed by the assessee. He has further given a finding that Paper Mill Association had fixed the price for purchases of waste-paper from the traders and, therefore, the scope of manipulated sales price was not established and there was no evidence to conclude that waster-paper supplier have higher gross margin on sales only because their purchases are from small type vendors. He has further given a finding that 15% margin of profit is not possible in the case of assessee. He has further given a finding that Central Circle Surat had completed the assessment of small traders by estimating the Gross Profit and had considered the gross profit rate between 0.5% to 0.75% on similar facts as that of assessee. He thereafter after considering the Gross Profit and Net Profit ratio shown by the assessee, estimated the Net Profit at 2% as against 1.10....