TaxTMI 
TaxTMI 
2016 (11) TMI 437
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.... the following additions/disallowances: - (i) On account of Low Gross Profit (GP) Rs. 1,56,28,9650/- (ii) On account of Dollar Fluctuation Rs. 1,01,98,459/- (iii) Interest expenses disallowed u/s. 36(1)(iii) Rs. 91,663/- 2.2 Aggrieved by the order of assessment dated 09.12.2011 for A.Y. 2009-10, the assessee preferred an appeal before the CIT(A) 29, Mumbai on all the above three issues on which additions/disallowances were made. The learned CIT(A) disposed off the assessee's appeal vide the impugned order dated 12.03.2013 allowing the assessee partial relief; by deleting the additions made in respect of the two items listed at (i) and (ii) in para 2.1 of this order an upheld the disallowance of the interest expenditure of Rs. 91,663/- listed at (iii). 3.1.1 Revenue, being aggrieved by the order of the CIT(A)-29, Mumbai dated 12.03.2013 has preferred this appeal raising the following ground: - "1. 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. 1,56,28,960/- made by the Assessing Officer on account of low GP without considering the fact that the assessee was unable to satisfactorily explain the reason....
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....lant as per last year. Your honour would appreciate that the figures of last year cannot be compared with that of the current year due to adverse factors. The Assessing Officer has himself in the order noted that the appellant had sold 2800 MT last year for Rs. 31.86 crores as against 2060 MT during the current year for Rs. 33.08 crores. Your honour would appreciate from the above that the appellant had sold goods during the year at the average rate of Rs. 160.58 per kg as against the rate of Rs. 113.78 per kg. last year. Further, though the appellant has sold lesser quantity during the year as compared to last year, the turnover has incurred from Rs. 31.86 crores to Rs. 33.08 crores during the year. (4) The appellant submits that having accepted recession and adverse market conditions this year, Assessing Officer himself has given 50% reduction. However, there was no justification for even the balance 50% addition of the difference in gross profit, especially when no defections were found in earlier the books of account or in the details field by the appellant by the appellant. It may be appreciated that the Assessing Officer has not rejected the books of accounts of the appella....
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....ies and perused and carefully considered the material on record. The facts of the matter as emanate from the record are that in the course of assessment proceedings, the AO observed that the GP of the period under consideration shown at 5.93% was less than the GP of 15.38% declared in the immediately preceding year. On being queried in this regard, the assessee submitted that the main reason for fall in GP was mainly due to worldwide market recession, due to fluctuation in the rate of the dollar and also due to high sea sales that earned only 2% profits, which were not there in the last year. The explanations put forth by the assessee for low GP in this year did not find favour with the AO and he proceeded to estimate the GP @ 15.38%, being the GP of the immediately preceding year; and thereby made an addition of Rs. 1,56,28,960/- on account of low GP, after giving reduction of 50% for recession and adverse market conditions. 3.3.2 On appeal before the learned CIT(A), the assessee, inter alia, contended that the AO had wrongly estimated the GP @15.38% of the earlier. According to the assessee the AO had not pointed out any defects in the assessee's books of account that were audit....
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....% 2011-12 9.62% From the above it is clear that in the appellant's line of business the GP varies considerably year after year. (iv) One of the main reasons for reduction in GP is exchange fluctuation loss suffered during the year. In this year appellant has suffered loss of Rs. 1,01,98,459/-, on account of foreign exchange rate fluctuation, whereas in the next there is a gain in the foreign exchange rate account amounting to Rs. 1,92,85,685/-. Such a huge amount of foreign exchange loss/gain is a very important reason for fluctuation in GP in year after year. If in this year the foreign exchange fluctuation loss of Rs,1,01,98,459/- is excluded then there would be net profit of Rs. 42,08,882/-. (v) The Assessing Officer has noted few instances in the assessment order where appellant has earned higher rates of GP. During appellate proceedings appellant has given many instances of sales where a very low GP has been earned. There are instance of loss also. The appellant has submitted a list of 22 such instances out of which some of the instances are reproduced here below: (vi) In order to make the addition by estimating Gross Profit of the appellant, the Assessing Officer....