TaxTMI 
TaxTMI 
2018 (6) TMI 160
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....n of Rs. 3,81,75,044/- made on account of estimation of gross profit. 3. The Ld. CIT(A) has erred in law and on facts by not appreciating the material facts brought on record by the AO in the assessment order. 4. On the facts and circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the AO. 5. It is therefore, prayed that the order of the Ld. CIT(A) may be set-aside and that of the AO be restored." 3. The issues raised by the Revenue are inter-connected to each other therefore we have clubbed all of them for the purpose of adjudication and brevity. 4. The Revenue in this appeal has challenged the deletion of the addition made by the AO on account of suppression of production leading to the suppression of sale as well as determination of gross profit on estimated basis. 5. Briefly stated facts are that the assessee in the present case is a Private Limited Company and engaged in the manufacturing business of S. S. Cold Rolled Coils/Strips and Generation of Power. There was a survey at the factory premises of the assessee located at 245-246, Village Sari, Ahmedabad Bawla-Highway, Ahmedabad dated 21-01-2015. During the survey pr....
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.... 656.85 2.00 Accordingly, the AO was of the view that the assessee has suppressed its production leading to suppressed sale therefore there is a fall in the GP ratio consistently. In-fact the assessee has claimed all the expenses against the suppressed sale which is leading to fall in the GP ratio. Thus, the AO further observed that the financial statements are not reflecting the true and correct income of the assessee. Accordingly as per the AO the books of accounts of the assessee are liable for rejection u/s 145(3) of the Act. Finally, the AO after rejecting the books of accounts held that the gross profit of the assessee should have been enhanced by Rs. 3,81,75,944/- (3,26,29,01,170 x 1.170%). However, the AO further observed that the amount of addition on account of suppressed production/sales is greater than the amount of enhanced gross profit determined by 1.17% of the turnover. Accordingly, the higher amount of disallowance of Rs. 4,57,82,539/- was treated as suppressed sale/ income and added to the total income of the assessee. Aggrieved assessee preferred an appeal to Ld. CIT(A). The submission of the assessee can be categorized as under : 6. Sub....
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.... (vii) The assessee was maintaining day to day stock register of the inventories and no defect/ unaccounted stock was pointed out on the basis of such records in the details of the raw materials, its consumption, scrap and finished goods manufactured. The details of the goods removed are duly furnished to excise department on monthly basis but no defect whatsoever was recorded by such excise department. 7. The submission of the assessee for the rejection of the books of accounts: (i) Once books of accounts of the assessee have been rejected then the AO was required make the assessment u/s 144 of the Act but the assessment has been framed u/s 143(3) of the Act. (ii) There was no defect pointed out by the AO in the books of accounts of the assessee during the assessment proceedings. (iii) All the books of accounts were duly audited under excise, income tax, VAT and companies Act but no defect in the same was mentioned. The learned CIT (A) after hearing the contention of the assessee deleted the addition made by the AO by observing as under : Finding of the Ld.CIT(A) regarding the addition of Rs. 4,57,82,539/- as under: "6.6 From....
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....ant is considered then it cannot be said that there is any other process loss in excess of what has been disclosed in Form E.R. 6 to the excise department. In absence of any corroborative evidences, all these factors go on to support the claim of the appellant that it had been able to reduce the process loss by bringing new machineries or making modifications in the existing ores Further during the course of survey no evidence of any unaccounted sales was found nor has any person at the factory confirmed of there being any accounted production/sales. 6.7 In light of the circumstances and facts mentioned above, 1 am of the considered opinion that the appellant has not suppressed its production by 4,45,355 kgs the average sale value of which comes to Rs. 4,57,82,539/-. Therefore AO is directed to delete the addition of Rs. 4,57,82,539/- Thus this ground of appeal 3(a) is allowed." Findings of the Ld. CIT(A) regarding the rejection of the books of accounts. 7.2 I have carefully considered the rival contention as well as the observation of the A.O The assessing Officer has determined addition of Rs. 3,81,75,944/- on account of reduction in the Gross profit ou....
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.... (2013) 216 Taxman 225 (Mag) (Guj.)(HC) it has been held that "The Assessing Office; noticed that there was fall in gross profit rate declared by assessee as compared to the preceding year and he made addition on account of low gross profit rate to assessee's income. However, no specific defect in maintenance of books of account by assessee had been pointed out by Assessing Officer Held, the Assessing Officer was not justified in rejecting book results and enhancing gross profit rate. (AY.2005-06)". 7.5 In view of above facts circumstances, the decision taken with respect the ground no 3(a) and in view the case law mentioned above, I am of the considered opinion that the action of the AO in rejecting books of accounts and estimating profit is not justified and no addition on this count is required to be mace. Therefore, addition in the gross profit of Rs. 3,81,75,944/- is also not required Thus this ground of appeal 3(b) is allowed." Being aggrieved by the order of Ld. CIT(A) Revenue is in second appeal before us. The Ld. DR before us vehemently supported the order of the AO. On the other hand, Ld.AR before us submitted as under: "Ground No.1 Addition of....
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....d AO for non-acceptance of the explanation have been met out before the ld.CIT(A) and after considering the same, the ground has been allowed by the ld.CIT(A).Refer marked para 6 on page no 15 of the Id.CIT(A). Further the explanation for the production sheet found during the course of proceeding under section 133A has been given by the company. 8. That, in any case, alleged working of suppressed production cannot be base for making am addition for sale, in absence of any evidences of its sales or unaccounted of lying in stock. 9. In view of the above facts and submission, reliance is placed on the order of the ld. CIT(A) and therefore ground of the revenue is required to be dismissed. Ground No.2 1. That the said addition has been made without issuing any show cause notice. 2. In view of the above submission, no defect in the books of accounts have been found and therefore, the book result cannot be rejected under section 145 of the Act. 3. The reduction of the gross net profit cannot be ground for the rejection of the books of account under section 145 of the Act. 4. In view of the above facts and submission, reliance....
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....our considered view, the statement recorded during the F.Y.2014-15 on the basis of documentary evidences pertaining to F.Y. 2014-15 cannot be ipso facto applied to the A.Y. 2012-13 without having any corroborative evidence. In holding so, we find support and guidance by the order of this Tribunal in the case of ITO vs. Rutvi Steel & Alloys Pvt. Ltd. in ITA No.3870/Ahd.2007 pertaining to A.Y. 2005-06, order dated 18-06-2010, wherein, it was held as under: "13. We have heard the rival submissions and perused the materials available on record. In the instant case, the assessee is a Private Limited Company engaged in the business of manufacture of M. S and CTD Bars. The Learned Assessing Officer observed that there was huge variation between the production shown by the assessee and the units of electricity consumed in each month during the year held that the books of accounts are not reliable and rejected the same by invoking section 145 of the Income Tax Act, 1961. He thereafter, observed that in the month of May 2004, the assessee has shown production of 133MT against consumption of 82847 units of power. Thus, he held that for 1 MT of production, 622.9 units of power cons....
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....t the assessee has purchased raw materials outside the books of account for making unaccounted production. Further, the assessee has maintained books of account, purchase and sale register and no defects could be pointed out in the same by the Learned Assessing Officer. Further, no error could be pointed out in the submission of j the assessee that it has maintained RG-1 register which is subject to verification by Excise Authorities and no defect has been pointed out by them on their inspection and that the accounts of the assessee are audited under the Companies Act and the Income Tax Act, 1961 and no adverse comments were made by the auditors on the accounts of the assessee. Further, the Hon'ble Delhi Bench of the Tribunal in the case of Pondy Metal and Rolling Mills P. Ltd, (Supra) has held that where assessee is maintaining regular books of accounts and all the purchase and sales are duly vouched and supported by raw material register, production register and finished good register which were subject to check by excise authorities no addition can be made on account of alleged suppression of production simply on the basis of consumption of electricity. We also find that the....