TaxTMI 
TaxTMI 
2016 (11) TMI 1154
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....ADDITION ON ACCOUNT OF LOW GROSS PROFIT AND ESTIMATION OF SALES (Rs.15,45,186/-) i. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition of Rs. 15,45,186/- made by the A.O. to the income of Goa unit on estimate by adopting the figure of the Murud unit and accordingly dismissing the ground of appeal. ii. The ld. CIT(A) erred in not appreciating that: (a) The Gross Profit shown by the appellant in the Goa unit was comparable and in fact better than the result shown in earlier years. (b) Maintenance of quantitative details of consumable food items running into hundreds is not practicable, as also appreciated by the Govt. of India, which grants exemptio....
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....cer, therefore the assessee filed the present appeal before us. ISSUE NO.1:- 4. Under this issue the assessee has challenged the confirmation of addition to the tune of Rs. 15,45,186/- made by the Assessing Officer on account of the income of the Goa unit assessed on the basis of the figure of the Murud unit. The assessee was in the business of hoteliering. The assessee was running two units vide which one unit was being run at Goa whereas the other unit was being run at Murud. The sale rate at Murud unit was much lower than the sale rate of Goa of food and beverage items. The assessee company did not keep any record of day to day consumption of food and beveragers purchased and consumed and sales made. The Assessing Officer noted the....
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....ge 67 of PB). The books results as shown in all earlier years have been accepted by the AO and therefore the AO ought to have accepted the Gross Profit as shown in the Goa Hotel in the year under assessment (Refer pg. 67 of P.B.) (ii) The accounts of the appellant company are audited under provision of Companies Act 1956 and also u/s.44AB of the I.T.Act and are subject to scrutiny by other government departments, viz., Luxury Tax and Sales Tax Officer at Goa and Murud. (iii) The AO erred in failing to make out a case as to why the G.P. shown by the appellant was not acceptable. He further erred in failing to bring on record any comparable case of any other outside assessee in the same geographical area having similar nature of busines....
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.... Murud unit and estimated the sales at Rs. 33,68,206/- and added the difference of Rs. 15,45,186/- as alleged suppressed sales. 7. All figures which have been mentioned in the said assessment order speaks about the less profit of the Goa unit. In view of the said figures mentioned above, we are of the view that the Assessing Officer has wrongly assessed the gross / net profit of the Goa unit by comparing the profit of Murud unit. In view of the above said specific facts and circumstances, we are of the view that end of the justice would meet if the disallowance to be reduced to the extent of 50% of the above addition to the tune of Rs. 15,45,186/- Accordingly, we allow the same and the Assessing Officer is hereby directed to reduced the ....
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.... (a) the correctness of the claim of expenditure made by the assessee; or (b) the claim made by the assessee that no expenditure has been incurred, in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provision of sub-rule (2). (2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:- (i) the amount of expenditure directly relating to income which does not form part of total income; (ii) in a case where the assessee has incurred expenditure by way of interest during the previous yea....
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....on 14A read with Rule 8D of the Act is applicable, therefore the CIT(A) has directed the Assessing Officer to re-compute the expenditure incurred to earn the exempt income in view of the provision contain in section 14A read with Rule 8D of the Act. We found no ground to interfere with the finding of the CIT(A), therefore, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which does not require to be interfere with at this appellate stage. Therefore we decide this issue in favour of the revenue against the assessee. 10. In the result, the appeal filed by the assessee is hereby partly Allowed. Order pronounced in the open court on 23rd September, 2016. ============= Document 1 Sr. ....