2020 (7) TMI 685

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....y erred in confirming the addition to the extent of 10,52,356/- by applying GP rate of 1.92% without appreciating the fact all the sales and purchases were fully vouched and verifiable 'quantity-wise & value wise as contended in the assessment and appeal proceedings. Thus the addition of Rs. 10,52,356/- confirmed on the basis of presumptions and surmises deserves to be deleted. 3(a) On the facts and in the circumstances of the case the learned CIT(A) has factually and legally erred in confirming the disallowance of various expenses to the extent of 10% (except the disallowance of Rs. 1,55,880/- made on account of salary payments to staff), without appreciating the fact that all the expenses are fully vouched and verifiable and are exclusively for business purposes only. Thus the addition so confirmed deserves to be deleted. (b) Further, the ld. CIT(A) has erroneously confirmed the addition of Rs. 1,55,880/- disallowed out of the salary paid to the staff members without appreciating the fact that such expenses were fully verifiable and evident from the official records of PF, ESI and Labor Deptt. Etc. as in the 'past'. Thus the ld. CIT(A) was not justified in ignor....

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....the ld AR that the book results have been incorrectly rejected u/s 145(3) of the Act ignoring the past history of the case. In the past and in subsequent years, the book results had never been rejected u/s 145(3) of the Act and no trading addition had ever been made. No mistake or any discrepancy was pointed out in the quantities of turn-over and the rates of sales or purchases. In absence of any such mistake, or discrepancy, no trading addition is legally maintainable. Low GP rate should not be basis of the rejection of the books as held by the Hon'ble Rajasthan High Court in the case of M/s Hues India Pvt. Ltd. In the Asstt. Yr. 2009-10, the declared GP of 1.56% had been accepted by the Department without making any trading addition. Thus the GP shown during this year @ 1.5% is very much comparable and acceptable. During this year, though the GP rate had gone down as compared to the preceding year for the valid and honest reasons, yet the NP rate was far better. The NP during the year was 0.48% as against 0.44% in the two immediate preceding years. In the circumstances, the fall in GP during the year is not detrimental as adversely viewed by the authorities below. Again the au....

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....rcentage of shortage claimed in the preceding year had been duly accepted and assessed by the Revenue. In the circumstances, rejection of book results on this account are not warranted. The second reason as assigned by the ld. CIT (A) is also not legally maintainable as held by the Honorable Rajasthan High Court in the case of M/s Hues India Pvt. Ltd. (vide appeal No. 56/2015 dated 30.7.2015). The Honorable High Court have observed that for low GP rate, book results should not be rejected u/s 145(3) of the Act. This judgment has direct bearing on the facts of the present case. Thus both the reasons as assigned by ld. CIT (A) to reject the book results are factually and legally incorrect so the findings on the point deserve to be quashed summarily. 5. Regarding trading addition of Rs. 10,52,326/- as confirmed by the ld. CIT (A), it was submitted that she had sought to confirm this 'huge' addition mainly for the reason that during the year, there was fall in the GP rate as compared to the preceding years. As the quantity loss by way of evaporation had been erratic as evident from the monthly charts. In the monthly chart of MS, the shortage in the month of December was s....

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....6% which had been accepted and assessed by the Department. In other cases of Petrol Dealers at Jaipur, the quantity loss @ 0.60% and above was held to be reasonable. (e) Even other-wise also, on account of the alleged excessive quantity loss by evaporation in the month of December as pointed out by the ld. CIT (A) in the appeal order, the quantity loss was hardly 56 liters only as mentioned above. The value of such alleged excess loss shown in the month of December would work out to Rs. 3909/-only (56 x 69.82). In the circumstances, it would be highly illogical and unjustified to confirm the addition of Rs. 10,52,326/- for such petty variation. Obviously the addition so made is highly excessive and deserves to be deleted. In view of above discussions, the ld. CIT(A) was not justified to confirm the 'huge' trading addition of Rs. 10,52,326/- on account of such minor variation. Thus the addition so made on the basis of such illogical reason deserves to be deleted. 6. The ld. AR further submitted that an addition of Rs. 3,12,055/- made on account of disallowance of the expenses debited to P & L A/c. Except disallowance of Rs. 1,55,880/- on account of the salary expenses, the ....

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....e salary payments made to him were very fair and reasonable. During this year, he was paid about Rs. 6,000/- per month totaling Rs. 78,000/- (including bonus etc.). In the past also, salary payments made to him were accepted by the Department. The Authorities Below have no valid reason to deviate from the past history. More-over, he is regularly assessed to tax and had been showing such salary receipts in his Income Tax Returns. As the salary payments made to him are evident by the ESI LABOR, PF & Income Records etc. and had been accepted in the past, so the same could not be negated during this year on flimsy grounds as assigned by the ld. CIT(A). In the circumstances, the additions so confirmed by the ld. CIT(A) under this head are devoid of merits and the deserve to be deleted summarily. 9. Per contra, the ld DR submitted that the case of the assessee was selected for scrutiny under CASS for the reason that the assessee has shown low net profit from large gross receipts. During the course of assessment proceedings, the Assessing officer observed that the assessee has declared lower G.P rate of 1.5% and the AR of the assessee has not been able to justify and specify the rea....

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....d that the assessee has declared a higher net profit rate of 0.48% as compared to 0.43% for A.Y 2011-12, and 0.44% for A.Y 2010-11. Therefore, as far as comparative position vis-à-vis past years is concerned, the assessee has declared a better net profit rate during the year under consideration. 12. Now, coming to the reasons for rejection of books of accounts and invocation of provisions of section 145(3) of the Act. In this regard, on perusal of the assessment order, we find that the assessee is a proprietor of M/s Shahid Basti Ram Filling Centre, Jaipur, an IOCL Petrol Pump which was allotted to her in F.Y. 2002-03 where the quantity and price of various petroleum products are regulated by IOCL and there is thus no dispute regarding the purchases, the sales, the opening and closing stock as shown by the assessee in the profit/loss account and stock records have been maintained and verified during the assessment proceedings. The Assessing officer has however disputed the shortages on account of evaporation claimed by the assessee and has compared the evaporation shortages for two months i.e, June and December and has come to a conclusion that the evaporation shortages s....