AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (3) TMI 468
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the payment represents only advance / imprest given to the employees of the appellant company for incurring the expenditure. Hence the addition of Rs. 6,26,000/- u/s 40A(3) deserves to be deleted in full. (b) The Ld CIT(A) has failed to appreciate that the expenditure incurred by the employees in each case was less than Rs. 20,000/- and therefore the provisions of section 40A(3) are not applicable at all. The appellant craves leave to add, alter amend, delete forego or modify any of the grounds of appeal before or at the time of hearing. 3. The Ld. Counsel for the assessee did not press the above grounds due to smallness of the amount for which the Ld. DR has no objection. Accordingly the grounds raised by the assessee are dismissed. ITA No.5307/Del/2015 (By Revenue for A.Y. 2012-13) 4. The grounds raised by the revenue are as under :- 1. The order of Ld. CIT(A) is not correct in law and on facts. 2. On the facts and circumstances of the case, the CIT(A) has erred in deleting the addition of Rs. 8,58,68,992/- on account of increased profit after invoking provision of sec. 145(2) of the I.T. Act, 1961. 3. On the facts and circumstances of the case, the CIT(A) has err....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to Rs. 40,40,400 under the head "Fixed Assets". However, the same have been found to be credited in the P&L account under the head "Additional income". The credit entry of Addl income of Rs. 3,37,59,400/-. in the P & L A/c appears just before claiming the expenses. However, by crediting the 'additional income' just before claiming the expenses in the P&L account, the assessee has set it off against the expenses for arriving at the net profit. By following this methodology the assessee has derived profits of Rs. 29 Crore (0.79%) from the P & L account. Let us examine the net profits of the assessee in the last 3 immediately preceding financial years. This is given below : Sl. No. F.Y. Turnover (In Crore) Net Profit ( In crores) Net Profit % 1 2008-09 189.01 8.24 4.37% 2 2009-10 234.92 6.19 2.63% 3 2010-11 260.79 3.45 1.32% From the above, it is seen that the N. P. of the assessee has ranged, from 1.32% to 4.27% in the last three financial years. It may be noted that these net profits have arisen to the assessee in these financial years without declaring any additional income in the P & L account. This means that the assessee has earned profi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ring the assessment proceedings. The assessee could not produced any details, confirmations, bills & vouchers or books of accounts to substantiate the financial result in the P&L account. Even proper details were submitted till the fag end of the year i.e. on 14.03.2014. No books of accounts were also produced for verification. The assessee also did not appear inspite of being provided a final opportunities on 18.03.2014. e. In the above background the financial results shown by the assessee (after excluding the additional income) cannot be accepted and are rejected u/s 145 of the I.T. Act, 1961. f. The strategy adopted by the assessee to camouflage the actual financial results by crediting the additional income to the P&L account is not acceptable. By doing this the assessee has annulled the entire effect of the surrender made during the course of search as well as in the return of income. g. It is pertinent to mention that the assessee has not retracted the surrender made by it during the course of search. It is only the manner in which the surrender has been made that is objectionable, as it nullifies its effect by increasing the net profits that should have been there i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it was necessary for him to examine the claim of various expenses debited to P&L account. He has, issued a detailed questionnaire on 1.11.13. The appellant has furnished information as required by the questionnaire, in parts. AO has cited certain inadequacies on the part of the appellant in complying with the requirements of the questionnaire. He has noted that on 18.3.14, no one appeared from the assessee's side. Thereafter, he has proceeded to reject the books of account and assessed the income on estimation by adopting the net profit rate equivalent to average of the past 3 years net profit. The main conclusion drawn by the A.O. as found at pages 9 to 11 of the assessment order are as under:- a. First, it has to be seen what would be the net profits of the assessee if the search had not taken place. As per the financials filed by the assessee, an additional income of Rs. 3,37,59,400/- has been credited in the P&L account as income declared due to unaccounted and undisclosed documents found during search. This means that the assessee has taken the net undisclosed income to the P&L account without bothering to make any consequential changes to its profit and loss account otherwi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....7,59,400/- will therefore be separately added to the net profits, after bring the later at par with the net profits of the immediately preceding years as has already been done in the para above. This is the income earned by the assessee from its undisclosed sources. The net profit (without additional income) is therefore, taken at Rs. 8,58,68,992/-. The undisclosed income of Rs. 3,37,59,400/-, as declared by the assessee itself, will therefore be added to it. 4.1.5 It is noted here that there has been definite delay on part of the assessee in complying with the requirements of the questionnaire of 1.11.13. This questionnaire contains more than 50 questions, which are very elaborate and touch upon almost all heads of expenditure and balance sheet items. As per the various letters and appellant has furnished replies to almost all questions in the said questionnaire. However, the same have been furnished in parts over a period of time. It is noted here that even the question No. 43 of questionnaire dated 1.11.2013 assessment order has been replied vide letter dated 28/02/2014 which is a very large bunch containing 317 pages. 4.1.6 It is noted here that even though the A.O. mention....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted keep the promise made evidences in respect of undisclosed sale/ bogus expenses that surrender of Rs. 3,37,59,400/- has been made only to by the promoters/director even though no incriminating evidences in respect of undisclosed sale/ bogus expenses etc. were found in the appellant's case. It has also been pointed out that even the AO has not brought on record any incriminating evidences in the assessment order. 4.1.9 It is noted here that the A.O. has completed the assessment without seeking any explanation for fall in GP/NP ratio from the appellant. During the appellant proceedings, the justification/explanation provided by the assessee has been examined by the A.O. with regard to the books of account. He has not found any discrepancies nor raised any counter grounds. The JCIT, who has forwarded the AO's report has remarked that the assessee has inflated the expenses and has nullified the fact of surrender of additional income by crediting the same to P&L account. He has also stated that the additional income is the income from undisclosed sources and cannot be treated for the purpose of allowing expenses. In this regard, it is noted that by crediting undisclosed income on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....81364 Total 101619334 22139563 1 4.1.12 Considering the above, I find merit in appellant's ground and delete the addition of Rs. 8,58,68,992/-. The grounds on the issue are allowed. 11. Aggrieved with such order of the CIT(A), the revenue is in appeal before the Tribunal. 12. The Ld. Counsel for the assessee, at the outset, drew the attention of the Bench to para 4.1.2 of the order of the CIT(A) and submitted that the AO, while rejecting the books of account has not pointed out any specific deficiency in the books of accounts and made huge addition by estimating the net profit. Referring to the order of the Tribunal in the case of the sister concern of the assessee namely M/s. Pearl Bottling (P) Ltd. vide ITA No. 5305 and 5306/Del/2015 order dated 27.02.2019 for A.Y.2011-12 and 2012-13, he submitted that under identical circumstances the Tribunal at page 34 para - 6.1 has thoroughly discussed the issue and upheld the order of the CIT(A) in deleting the addition. He accordingly submitted that this being a covered matter in favour of the assessee, the ground raised by the revenue should be dismissed. 13. The Ld. DR on the other hand while supporting the order of the AO d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....11.13 have been furnished. As regards fall in net profit ratio, a comparative chart of financial results for the current assessment year and for the three preceding assessment years has been provided The fall in G.P. and Net profit ratio has been attributed to increase in cost of purchases and raw material and due to increase in financial cost. The fall in G.P. by 5.4% (24.85% to 19.36%) and net profit rate by 18.17% (i.e. 2.81% to (-) 5.36%) was on account, of increase in cost of purchase and cost of raw material consumed. It is further noted that there is a fall in G.P. by 5.49%. Out of 5.49%, 4.91% fall in G.P. has been attributed to increase in cost of raw material consumed and purchases of traded goods. The balance fall in G.P. (5.49% (-) 4.91% - 0.58%), was attributable to increase in salary, wages, repairs & maintenance expenses. The fall in net profit ratio has been attributed to fall G.P. rate which in turn was clue to increase in cost of raw material and increase in purchase of credit goods. The net profit rate has been severely affected by increased financial cost by 107.63% during the current previous year as compared to average financial cost of last three preceding ....