TaxTMI 
TaxTMI 
2019 (6) TMI 1258
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....ts and circumstances of the case, the ld CIT(A) has erred in law and on facts in deleting the addition of Rs. 6,94,08,967/- made on account of extra profit by applying GP Rate at 6% on the basis of average gross profit of other entities engaged in the trade of wholesale liquor business. 2. The order of the CIT(A) is erroneous and is not tenable on facts and in law." 3. Brief facts of the case shows that assessee is a company engaged in the business of distribution of potable liquor both Indian made foreign liquor and country liquor. The assessee is part of "Chaddha Group". Such under section 132 of the income tax act was initiated on that group on 1/2/2012. Therefore, the notice u/s 153A of the act was issued on 10/4/2013. Th....
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....arned assessing officer was after considering the discount received from distilleries and discount given to the customers. Thereafter the assessee also submitted a comparative statement after considering the discount factor and stated that the gross profit rate of the companies, which are compared by the learned assessing officer, is considerably low to the gross profit ratio of the assessee. The assessee also submitted detailed reasons for difference in the gross profit of the comparable company cited by the learned assessing officer and stated that there is a geographical difference, difference of turnover, the methodology of accounting of discount, surrounding areas populated with many other outlets, product mix with respect to brands et....
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....ncrease in sales, there is also increasing the socalled discounts. Moreover, the AR of the assessee has merely produced the copy of the parties to whom discounts have been allowed without adducing any other corroborative evidence to substantiate its claim. Therefore, as the AR of the assessee company has not furnished complete details with documentary evidence in support of its claim of discount allowed, I am constrained to recalculate the gross profit at the rate of 6% in case of the assessee company keeping in view the average gross profit rate of other entities indulged in the same business. The gross profit works are at 4.75% is calculated from the profit and loss account for the period 1/4/2010 - 31/3/2011. The assessee company has sho....
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....ts pointed out in the books of accounts, same cannot be rejected on the gross profit addition made by the learned assessing officer on the basis of the comparable companies which are distinguishable on the facts has rightly been deleted by the learned CIT - A. 7. We have carefully considered the rival contention and perused the orders of the lower authorities. In the present case, the learned assessing officer has made addition to the book results of the assessee without rejecting the books of accounts. To reject the books of accounts the learned assessing officer must find out latent, patent, and glaring defects in the books of accounts. In the present case, the learned assessing officer has not found any defect in the books of accounts....
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.... did not point out even a single instance, where the assessee‟s claim of discount was found to be incorrect or unverifiable. 8. He compared date of sales and discount of the subsequent year. He was silent on the fact that every assessment year is different assessment year. The assessee cannot be asked as to how he should carry out his business. On the basis of double of sale in the subsequent year and fall in amount of discount allowed, the AO drew a conclusion that the assessee company has suppressed its aims for assessment year 2011 - 12 through raising a suspicious claim in the form of discount allowed. Every expenditure is allowable u/s 37 of the income tax act, 1961, if they are not in capital in nature or not p....
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....ny material on record. He is of the opinion that the discount is excessive because the gross profit of the assessee is lesser income paid to the gross profit of the other entity of the similar trade. He did not brought on record the geographical area of business of the other entities. Therefore, the comparison was incomplete and incorrect and cannot be relied upon. 12. The AO did not pointed out any defect in the books of account. He also did not invoke the provisions of section 145 (2) of the income tax act. No specific defect was pointed out in any amount of discount allowed. Merely the gross profit rate was lesser and the reasons furnished by the assessee were that the quantum of discount allowed is more, he simply believe that ....