2020 (10) TMI 787

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....of his order dated 06.03.2019 arbitrarily. (Ground Number 1 of ground of appeal filed before CIT (A). 2. That the appellant craves to add, delete, alter and amend or modify any of the grounds of appeal either before or at the time of hearing." The assessee has also raised an additional ground for these three years which is also common and reads as under :- "That AO was not justified in making addition of Rs. 12,80,062/- by invoking the provision of Section 145(3) of the Income Tax Act, 1961, particularly when the books of accounts maintained by the assessee are true and correct and true profit can be deduced there from. Learned LD. CIT Appeal also grossly erred in affirming the order AO." The hearing of the appeal was concluded through Video Conference due to the prevailing situation of COVID 19 Pandemic. First, we take up the additional ground raised by the assessee challenging the rejection of books of account under section 145(3) of the Act. 2. We have heard the ld. A/R as well as the ld. D/R and considered the relevant material on record. The AO has pointed out various defects during the course of scrutiny assessment which are enumerated in para 3 ....

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....considered the rival submissions as well as the relevant material on record. The assessee is engaged in the railway contract work and filed its return of income on 28.09.2010 declaring total income of Rs. 1,75,49,603/-. During the scrutiny assessment, the AO asked the assessee to furnish the books of account as well as other details and supporting evidences. From perusal of the books of account and other details filed by the assessee, the AO noticed various defects which are enlisted in para 3 of the assessment order as under :- " i) When reconciling the TDS receipts, a TDS of Rs. 39,535 (gross receipts 17,44,660) has not been related to the year under consideration. It was related to previous year, i.e. AY 2009-10. ii) On perusal of direct expenses, it is found that the following discrepancies were in the books of account of the assessee firm- a) Some purchase bills are not available and some payments were paid in cash. b) Consumable goods, purchases of sand were made in self made vouchers. c) Labour charges : assessee has submitted muster roll where only name of person is appearing and due to full particulars of labours, proper verific....

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....ption register, the AO has expressed his inability to verify the correctness of the closing stock including work-in-progress due to non-availability of Site-wise Consumption Register. Even the assessee is not disputing this fact that it is not maintaining the site-wise consumption register and the closing stock including the work-in-progress is determined only on physical verification. Therefore, in the absence of the proper record of the consumption of material, the correctness of the closing stock of the assessee could not be verified by the AO. We further note that the AO has raised a specific objection regarding TDS receipts not relating to the year under consideration but relates to the assessment year 2009-10 and when the assessee has not given any explanation on this objection, then having regard to the facts and circumstances of the case as discussed above, we do not find any error or illegality in the orders of the authorities below in rejecting the books of account by invoking the provisions of section 145(3) of the Act." Accordingly, in view of the decision of this Tribunal in case of assessee's sister concern engaged in the similar business activity, the additional g....

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....ng years including current year as under :- Particulars FY 2007-08 FY 2008-09 FY 2009-10 Sales 9,86,19,448 8,59,02,816 8,08,18,835 Gross Profit 1,18,33,739 92,70,173 89,37,103 Net Profit before interest and remuneration to partners. 55,15,568 51,64,667 41,17,011 GP Ratio 11.99% 10.79% 11.06% For the assessment year 2008-09 the assessee declared GP at 11.99%, for the assessment year 09-10 the assessee declared GP at 10.79%. However, there was an addition made by the AO and after the addition sustained by the ld. CIT (A), the GP for the assessment year 2009-10 comes to 11.02%. Therefore, even if taking the average of preceding two years which comes to 11.05%, the GP declared by the assessee at 11.06% cannot be said to be at the lower side or any significant decline in GP. Accordingly in the facts and circumstances of the case, when the assessee has declared the GP in line with the past history of the assessee which has attained the finality, the adoption of GP rate by the AO without any basis cannot be accepted. Hence the trading addition made by the AO is deleted." In the case of the assessee, the AO while estim....