TaxTMI 
TaxTMI 
TaxTMI 
2017 (6) TMI 561
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.... hire charges etc. There was a survey conducted in the business premises of the assessee on 18.1.2011 and the survey team observed from the manufacturing and trading account for the period 1.4.2010 to 18.1.2011 (pre-survey period), the gross profit declared therein as per the books was 5.96% of turnover. The ld AO later observed from the manufacturing and trading account for the entire period ending 31.3.2011, the gross profit declared by the assessee was at 19.46%. He further observed that the assessee had shown gross profit for post-survey period ( i.e. from 19.1.2011 to 31.3.2011) at 105.19%. The ld AO show-caused the assessee for low gross profit rate during pre-survey period and assessee replied as follows:- "With due respect we would like to inform you regarding your query about the G.P. rate in pre-survey period is 5.96% (excluding labour charges and hire charges) on turnover of 9.13 crores as against G.P. rate of 19.64% for the whole year on a turnover of 10.60 crores (excluding labour charges and hire charges). I would like to furnish that the profitability of the business does not in the same proportion throughout the year. Further, we are not habituated to prepare trad....
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....lly high even if one ignores the working of the gross profit by the A.O. on page-2 of assessment order. Working directly from the submission of the Appellant vide letter dated 04.09.2014 indicates that as per the Appellant's working also, the gross profit in the post Survey period of Rs. 1,38,19,490/- on sales of about Rs. 1,45,88,318/- plus labour charges and crane hire charges of Rs. 57,03,444/- is about 68% of sales and other receipts. There are other problems in the final account of the post Survey period. For example, the closing stock is shown as Rs. 6,00,23,472/- whereas the closing stock on 18.01.2011 is Rs. 4,30,36,993/- as per the book value of the stock. Now, in this period of about 2 months 10 days, the closing stock in the said working in shown to have increased by about Rs. 1,69,86,479/- and the sales in the said period is shown as Rs. 1,45,88,318/-. Taken together the increase of closing stock and the sales is about Rs. 3,15,74,797/- and during this period purchase is only about Rs. 1,74,45,288/- excluding other expenses. Now, on a purchase of Rs. 1,74,45,288/- there is increase of closing stock of the corresponding period of Rs. 1,69,86,479/- and sales of Rs. 1,45,8....
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....be taken as the G.P. which reasonably can be said to have been deduced from the figures. Thus, there are so many contradictions in the book results in the pre-survey period and the post survey period and therefore the Appellant's income results of the final account cannot be accepted. 5.3. The A.O's addition as above is also arbitrary and absurd calculation and thus the estimation and the addition therefore is arbitrary and cannot be upheld. But there has to be an estimation of income that may have been earned by the Appellant for the assessment. Once the book results are rejected, then there has to be some estimation which may be adopted for the purpose of determining the assessed income. Before I suggest an estimate, we have to go back to the survey and the commitment of the Appellant to the survey party. It is on record and recorded in the deposition u/s 131 on 20.01.2011 that there was some agreement on estimation of income between the survey officials and the Appellant. They both seem to have agreed on estimated figure of income of Rs. 82 lacs and the tax liability arising therefrom of Rs. 25.5 lacs. Thus, Rs. 82 lacs of income comes to (on Rs. 11.4 crores) about 7.5% of N.....
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....course of survey without bringing any corroborative material on record. 3. FOR THAT when the appellate authority brushed aside the findings of the Assessing Authority, it was not open to him to sustain addition on a totally different ground merely relying on alleged confession of total earnings of the firm or disclosure made on survey spot. 4. FOR THAT the Ld. Commissioner of Income Tax (Appeals) simply harped upon the reply of the assessee vide which the alleged disclosure was made and the moment the statement of assessee is excluded from record then nothing is left the Appellate Authority to support his conclusion. 5. FOR THAT the law has been settled by Apex Court that section l33A does not empower any ITO to examine any person on oath: so statement recorded under section l33A has no evidentiary, value and any admission made during such statement cannot be made basis of addition. 6. FOR THAT when shortage of stock is found in survey, it is appropriate to apply G. P. ratio on the shortage portion to determine income, if there is any positive evidence that such shortage is attributable to sales not recorded in Books of Accounts. 6. We have heard the rival submissions....