TaxTMI 
TaxTMI 
2016 (11) TMI 884
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....sing Officer while completing the assessment made addition of Rs. 3,01,83,302/- estimating the gross profit on sales of iron and steel business at 10% and on the sales of textiles at 20%. The Assessing Officer rejected the books of accounts of the assessee observing that gross profit is very low, the sales and purchase made by the assessee are not genuine, assessee has not maintained proper stock records, assessee has not produced confirmations from the purchasers, the notices issued to the purchasers were returned unserved, the assessee could not produce the purchasers. Therefore, the Assessing Officer because of all these discrepancies rejected the books of account of the assessee and estimated the gross profit and made addition accordingly. 3. The assessee preferred appeal before the Ld. CIT(A) and the Ld. CIT(A) sustained the addition. Subsequently, the matter was carried to the Tribunal by the assessee and the co-ordinate bench sustained the addition partly by reducing the gross profit rate by 5% for both textile business and iron and steel business. The Assessing Officer initiated penalty proceedings under section 271(1)(c). In response to the penalty notice, assessee file....
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....sors (306 ITR 277). 5. The Ld. Counsel for the assessee submits that the assessee is into trading of iron and steel and fabrics on a wholesale basis. The addition was made in the assessment order by estimating the gross profit at 20% from these two businesses i.e. textile and iron and steel by rejecting the books of accounts. The addition was made on estimate basis without any cogent materials. The Ld. Counsel for the assessee inviting our attention to para 6.1 of the Ld. CIT(A)'s order submits that a remand was called for by the Ld. CIT(A) and in response to the remand report assessee also filed reply which is at para 6.2. The Ld. Counsel further invited our attention to page 9 of the Ld. CIT(A)'s order and the observations which were recorded by the Ld. CIT(A). The Ld. Counsel submits that finally the Ld. CIT(A) concluded that there is concealment of income. The Ld. Counsel further submits that there is no real concrete evidence to prove that these transactions of purchases are sham. It is submitted that no discrepancies were found about stocks. The Ld. Counsel for the assessee submits that the Assessing Officer has simply relied on the findings in the assessment order for imp....
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....embers who supplied and delivered the materials directly to the assessee's client. Thereafter assessee has raised sale bills on her client and in the similar manner her suppliers also raised the bills on the assessee. It was also stated in the report that while raising the sale bills on clients assessee used to keep her margin. The Ld. D.R. further referring to page 3 of the assessment order submits that the assessee has shown very low GP and is maintaining GP at 1% to 1.5 % on the margin of sales and this is very low margin in textile and iron and steel businesses. The Ld. D.R. further submits that in order to verify the genuineness of sales and purchase transactions as the assessee was showing very low GP, notices were issued to various parties from where the assessee has stated to have made purchases. The Ld. D.R. submits that many of the notices have been returned back by the postal authority with endorsements like left, wrong address, incomplete address etc. The Ld. D.R., however, submits that the assessee's husband submitted the confirmations of the parties where the notices could not be served by postal authorities. He submits that on verification of the confirmations the AO....
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....various discrepancies in the confirmations he treated such confirmations as dubious and non genuine. In view of all these discrepancies the Assessing Officer rejected the books of accounts of the assessee and estimated the gross profit at 20% in respect of sales made in the textile business and 10% in sales made in iron and steel business. The Ld. CIT(A) sustained the action of the Assessing Officer in rejecting books of accounts and estimating of gross profit. However, the Tribunal while sustaining the rejection of books of accounts by the lower authorities as they are not reliable and at the same time held that the gross profit estimated in the iron and steel business and textile business is on higher side. The Tribunal reduced the gross profit rate by 5% in both the businesses of the assessee. 8. The Assessing Officer levied penalty holding that there is concealment of income or furnishing of inaccurate particulars which the Ld. CIT(A) sustained. On a reading of the orders of the lower authorities i.e. the assessment order and the Ld. CIT(A)'s order, we find that the books of accounts were rejected on noticing various discrepancies such as no proper confirmations from the par....
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....-day stock register. The correct income was determined by merely applying a flat rate on the returned turnover. In view of these facts, it could not be said that the assessee was guilty of either fraud or willful neglect in the matter and the assessee had discharged the burden that lay on him. The Tribunal was justified in law in cancelling the penalty." 12. In the case of Commissioner of Income Tax vs. K.L. Mangal Sain (107 ITR 598) the Hon'ble Allahabad High Court held as under: "on appeal before the Tribunal it was urged on behalf of the assessee that it has been established that it was not guilty of fraud or gross or willful neglect. It was submitted on behalf of the assessee that the book version was rejected and profit was determined by applying a flat rate for want of proper verification. The Tribunal held that these facts may constitute sufficient material for making certain addition in the assessment but it does not follow that there was any fraud or gross or willful neglect on the part of the assessee. The mere fact that the book version has not been accepted could not lead to any finding to the effect that there was any fraud or gross or willful neglect on th....