AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (3) TMI 570
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....contentions perused the material available on records. For the sake of clarity submissions made in the applications are reproduced as under: "1] The Hon'ble ITAT vide its order dated28-03-2019 decided the appeals as filed against the order of the Ld CIT [A]-1, Indore dated 31-03-2016. 2.1] The Revenue had taken the following grounds in the present appealwhich are summarized as under: "1. Whether on the facts and circumstances of the case, the learned CIT(A) has erred in restricting the addition made on account of estimated GP. 2. Whether on the facts and circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 7,97,54, 165/ - and Rs. 3,41,55,992/~ made on account of alleged excise duty and VAT Tax collected but not paid in Government account. 3. Whether on the facts and circumstances of the case, the learned CIT(A) has erred in ignoring the facts of the case that the addition made on account of alleged excise duty and VAT Tax were based on incriminating invoices seized during the excise search and the same was not included in the turnover. 4. Whether on the facts and circumstances of the case, the ....
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....venue, we have partly allowed the ground of the appeal of the Revenue discussing the facts of present issue. Considering the material and rival submissions available on record, we find the ld. CIT(A) was justified in approving the action of the Assessing Officer. Thus, this ground of the appeal of the assessee is dismissed." 2.3.2] The Hon'ble Bench while deciding the said issue stated that the Ld Counsel of the assessee company relied upon the order of the LdCIT(A). However, this remark is factually not correct since the assessee company challenged the action of the LdCIT(A) in confirming the rejection of books of accounts. 2.3.3] The assessee company challenged all the additions made/issues raised in the assessment order before the Ld CIT (A). The LdCIT(A) after examining the submission of the appellant approved the rejection of books of accounts merely on the basis of finding of the show cause notice as issued by the Excise Department. The Ld.CIT(A) in Para 6.1 on inner Page No. 67 & 68 of his order observed as under: "6.1 On perusal of the material on record it is seen that it is an admittedfact that the DGCEI conducted a search on the premis....
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....ever, it is pertinent to mention that since the show cause notice issued by the Excise Department was quashed subsequently by the Hon'ble CESTAT; hence,there was no reason for maintaining the rejection of books of accounts of the assessee company. 2.4] That all other reasons as listed by the assessing officer were general in nature and duly addressed by the assessee company in the SYNOPSIS as filed before the Hon'ble Bench. The Hon'ble Bench was therefore not justified in approving the action of the Ld CIT (A) more so when very basis of rejection of the books of accounts by the LdCIT(A) did not exist.That in view of the above, Hon'ble Bench is hereby requested to recall its order and decide the said ground in respect of rejection of books of accounts afresh. ESTIMATION OF INCOME - Ground No. 1 of the Departmental appeal and Ground No. 4 of the appeal as filed by the assessee company 3.1] The Hon'ble Bench in Para 5 on inner Page No. 5 & 6 of its order decided the Ground No. 1 of the Departmental appeal and Ground No. 4 of the appeal as filed by the assessee company. The said para of the order of the Hon'ble Bench is reproduced as under for your r....
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....h the said ground of appeal at length but entire submission of the assessee company was not taken into account while passing the order which is thereforeamistakeapparent from record necessitating examination of the said issue afresh. The submission as filed before the Hon'ble Bench is reproduced as under: "3.1.1] The appellant in this ground of appeal has challenged the estimation of gross profit at 5% by the assessing officer and as reduced to 2% by the Ld CIT[A]. 3.1.2] The assessing officer while making addition to the total income of the appellant considered the turnover as shown by the appellantof Rs. 82,56,84,821/- and turnover as estimated by the Excise Department of Rs. 77,41,64,850/- thereby approximately totaling it to Rs. 160,00,00,000/- and thereafter applied the rate of Gross profit of 5%. The calculationis summarized in tabular form as under: S.No Particulars Amount [in Rs] 1 Total turnover as shown by the appellant 82,56,84,721 2 Additional turnover as estimated by the Excise Department 77,41,64,850 Total Turnover 159,89,52,571 Total turnover as estimated by the assessing officer 160,00,00,0....
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.... 3.3.2.4] Comaprative chart of cost of Raw Material and MS Ingot as purchased by the appellant for the Assessment Year 2010- 11 and 2012-13 is as under: S. No Description of material 2010-11 2012-13 Change in percentage MS Scrap M S Ingot MS Scrap M S Ingot MS Scrap MSIn got 1 Purchases 28,05,18,076 5,59,63,409 48,63,27,720 5,49,81,711 2 Qty [In M Tons] 24,120 2,420 29,233 1,748 3 Rate Per Ton 11,630 23,126 16,636 31,452 43.04% 36.00% 3.4] That on comparison of the above figures, it prima facie seems that price of raw material as consumed by the appellant increased by 43.04% in the year under consideration as compared to Assessment Year 2010-11. Similarly, the price of MS Ingot also increased by 36% in the year under consideration as compared to Assessment Year 2010-11. However, sales price of steel bar during this period increased by 32.57% and realisation of MS....
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.... Rolling Mills Private Limited had accepted the book results as declared by that company. 3.8] That initially M/s Anant Steels P Limited and M/s Shivangi Rolling Mills P Limited were incorporated by Late Shri Mohan Kumar Bansal and his brother Dr Rajendra K Bansal. That after the death of Late Shri Mohan Kumar Bansal on 18-08-2009, shares of both the companies in the group were transferred and from Assessment Year 2010-11 onwards, both these companies did not fall under the definition of either sister concerns or associate concerns. Hence, the assessing officer was not justified in simply rejecting the comparative chart of Gross Profit more so when nature of working of both these companies wasmore or less similar to M/s Jaideep Ispat & Alloys P Limited. Names of directors of both these companies is as under: S.No Name of Directors Anant Steels P Limited Shivangi Rolling Mills P Limited 1 [i] Smt Neera Bansal [ii] Shri Mayank Bansal [i] Shri Pankaj Bansal [ii] Shri Divanshu Bansal 3.9.1] The nature of busienss of the appellant and M/s Shivangi Rolling Mills P Limited was some how similar to that of M/s Jaideep Ispat & Alloys P Limited. Co....
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....her rate of G.P. in the post-search period as observed by the assessing officer. 3.11.2] The rate of Gross Profit as calculated by the assessing officer was factually notcorrect. Since, in the first period, the assessing officer had taken valuation of opening stock which was on the basis of audited financial statements and hence, opening stock taken as on 01-04-2011 was of Rs. 10,93,68,796/- which duly tallied with the stock reflected in the audited financial statements and similarly closing stock of Rs. 12,24,32,311/- was also on the basis of audited financial statements for the year under consideration which included stock of Raw Material, Finished Goods, Work In Progress and Stores & Spares. However, valuation of closing stock on 05-01- 2012 was taken on the basis of trial balance as on 06-01-2012 at Rs. 7,87,63,230/- which was not correct since the said valuation was not done properly in the mid of the year. The appellant also expressed its difficulties in preparing two trading accounts in a very short period i.e. in one day's time while filing its reply against the show cause notice as issued. 3.11.3] Quantity details of stock of raw material, finished goods,....
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.... Gross Profit at 0.82% and during the second period it had shown Gross Loss at 1.78%. The expenses as related to the period prior to 05-01-2012 which were debited during the second period was the main reason for variation in the percentage of Gross Profit of first and second period. However, it is clear that the appellantwas having profits and was not incurring losses as mentioned by the assessing officer in the assessment order during the first period. The valuation of closing stock as on 05.01.2012 can also be verifiable from the quantity as shown in the books as on 05-01-2012 by multiplyingit with the rate as adopted at the time of finalisation of the stock as on 31.03.2012. 3.11.7.3] That in view of the above, the valuation of closing stock as considered on 05-01-2012 by the assessing officer in the assessment order was not correct. The same need to be replaced by the correct valuation. The valuation as considered on 05-01-2012 in this letter was also on the basis of rates as considered at the time of finalisation as on 31.03.2012 and stock of raw material of scrap on FIFO basis. Thus, observation of the assesisng officer that the appellant incurred losses till 05- 01-....
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....ace reliance on the decision of the Tribunal, Indore bench in the case of Eagle Seeds & Biotech Ltd vs. Asstt CIT (2006) 102 TTJ (Indore) 1065: (2006) 100 ITD 301(Indore) wherein at page 320 it was held that the AO was not justified in applying GP rate in the matter and directed the AO to apply net profit rate as disclosed by the appellant in the books of accounts. Similar decision was taken in the case of MadanlalNarendra Kumar vs ITO ( 1988) 31 TTJ 401 ( Sic). Also we rely on the judgment of the Madhya Pradesh High Court in the case of CIT vsBalchandAjit Kumar ( 2004) 186 CTR (MP) 419: (2003) 263 ITR 610(MP). The Learned CIT(A) himself had observed in Para 3.8.1 that only net profit has to be adopted and agreed with the contention of the appellant. But however in final finding, he has observed that it is to be taken at GP only. There is a contradiction in his observation and hence we cannot confirm this finding of the CIT(A). 3.13.2] That Hon'ble Jurisdicitonal High Court in the case of CIT Vs Bal Chand Ajit Kumar as reported in 263 ITR 0610 has held that [refer para 6 of the order]: "6. We are in respectful agreement with the aforesaid opinion inasmuch as t....
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.... The same now requries to be deleted in full." 3.4.1] The Ld CIT (A) in his order dated 31-03-2016 in Para 7.5 on inner Page No. 71 reproduced a table in respect of rate of Gross profit as declared in the Assessment Year 2007-08 and also in the Assessment Year 2012-13 which is as under: S.No Description 2007-08 2012-13 Anant Steel Shivangi Anant Steel Shivangi 1 Sales 33,61,43,746 25,16,61,959 82,56,87,721 63,59,81,407 2 Gross Profit 1,14,58,944 79,20,096 25,98,878 -1,09,75,674 3 % of Gross Profit 3.40% 3.14% 0.31% -0.0173% 4.1 As considered by the AO 4.96% 4.58% 5% -0.0173% 4.2 As reduced by the Ld CIT(A) 3% 3% 4.3 As maintained by the Hon'ble ITAT 3.3% 3.3% 3.4.2] The percentage of Gross profit in the case of the assessee company was 3.40% in the Assessment Year 2007-08 and the same was restricted to 3.30% in case of unaccounted turnover in that year but book result a....