AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (3) TMI 588
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....it was claimed that case of the assessee company was selected under CASS and therefore addition need to be restricted to the reason for selection of the case under scrutiny only. 2[ That on the facts and in the circumstances of the case the Ld CIT[A[ erred in approving the rejection the books of account of the assessee U/s 145(3) of the Act as correct without properly appreciating the facts of the case and submission made before her. 3.1] That on the facts and in the circumstances of the case the Ld CIT[A[ erred in estimating the rate of net profit at 2.30 and thereby assessing the amount of net profit of Rs. 1,45,33, 103/ _ as against net loss of Rs. 3,62,89,590/ - as declared in the books of account without properly appreciating the facts of the case and submission made before him. 3.2[ That on the facts and in the circumstances of the case the Ld CIT[A] erred in approving the reference of GP rate as considered by the Assessing officer of M/s Jaideep Ispal & Alloys P Limited & M/s Rathi Iron & Steel Ltd. Pithampur while estimating the income of the assessee even when data of the same was not provided to the assessee for its comments and more so when turnover and bank loans ....
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.... 820/Ind/2018. 8. Ground No.1.1 raised by the assessee seems to be general in nature which thus needs no adjudication. 9. As regards Ground No.1.2 challenging the scope of scrutiny by Ld. A.O, since no specific submissions have been made by Ld. Counsel for the assessee before us, it seems that assessee is not interested to press this ground and therefore the same is dismissed as not pressed. 10. Ground No.2 raised by the assessee challenges the finding of Ld. CIT(A) confirming the action of the Ld. A.O rejecting the books of accounts u/s 145(3) of the Act and estimating the Net Profits. 11. Brief facts relating to this issue are that the turnover of the assessee decreased to 63.18 crores from the turnover of Rs. 91.10 crores in immediately preceding year. Net Profit is also in negative at (-) 5.74% as against net profit @ 0.5% in the preceding year. On observing these facts Ld. A.O sought various information from the assessee in order to examine that whether the books of accounts have been properly maintained giving the correct results at the end of the year after considering the submissions of the assessee rejected the book results u/s 145(3) of the Act on account of the follo....
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....ed that one of the basis was the show cause notice received from Central Excise Department for the alleged unaccounted turnover made by the assessee for Assessment Year 2010-11 to 2012-13 but the same will not stand for since the Hon'ble Customs, Excise & Service Tax Appellate Tribunal, New Delhi vide its order dated 27.09.2018 deciding in favour of the assessee has quashed the show caused notice issued by Excise Department. Reliance also placed on various decisions mentioned in the paper book. 14. Per contra Ld. Departmental Representative vehemently argued and supported the order of Ld. A.O and submitted that Ld. A.O has rightly rejected the book results and estimated the Net Profit and the discrepancies pointed out by the Ld. A.O are correct. 15. We have heard rival contentions and perused the records placed before us and carefully gone through the submissions made by both the sides. Through Ground No.2 assessee has challenged the finding of Ld. CIT(A) confirming the action of Ld. A.O rejecting the book results u/s 145(3) of the Act estimating the Net Profit. 16. We observe that Ld. A.O on noticing that the turnover of the assessee has decreased and the net profit has also de....
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.... A.O On verification of transportation proof of some parties not found on record such as proof of one party Hothour lspat P. Ltd. purchase of scrap shown by the company but no transportation proof found attached with builty. 17.2 Submission made by Ld. Counsel for the assessee: Most of the transport receipts as attached with the bills were verified by the assessing officer but the transport receipt as attached with the payment vouchers was not shown. Since, he called few month vouchers but transport receipt in respect of entire purchases from M/s Hothour Ispat P Limited are enclosed with this letter. 17.3 Our finding We observe that the assessee had maintained necessary records and the corresponding charges of transport receipt are generally attached to the bills of scrap purchased from Hothour Ispact Pvt. Limited. As accepted by Ld. A.O most of the transport receipts were attached except few and those also are now been placed before us showing that assessee is maintaining proper records of scrap purchased from Hothour Ispact Pvt. Lt and the corresponding bilties of transport receipts. Thus we find no merit in this defect observed by Ld. A.O. 18. In connection with the URD....
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....venue stampJ Further, on verification of freight payment it was also noticed that the assessee has debited fright payment on particular dates but the same was claimed to paid in two-three days. For example the assessee company has debited freight payment to Balaji Roadlines, Bilari of Rs. 18,500/-, Rs. 30,340/-, Rs. 37,095/- and Rs. 29,600/- on 06.04.2012 whereas the payment shown by the assessee in cash on 07.04.2012 of Rs. 30,00,000/-, 08.04.2012 of Rs. 30,000/- and 09.04.2012 of Rs. 25,535/-. It is very difficult to understand that the driver or truck operator has delivered the goods on particular date and received payment in cash in two three days and even the operators are not belonged to Indore but outside. 19.2 Submission made by Ld. Counsel for the assessee: That due to increase in the price of diesel and from distance where the scrap was purchased by the assessee. The amount of freight was increased in this year as compared the same with the previous year. The entire transport receipt are available with the assessee for verification. 19.3 Our finding Ld. A.O observed that freight expenses has increased to Rs,2,10,99,914/- from Rs. 1,92,59,266/- incurred in preceding ....
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....keep full strength of staff in its Plant. However, production depends on demand of the product of the assessee. The assessee has also deducted PF and ESIC on entire amount of wages as paid. The salary/wages register was also maintained by the assessee company and verified by the PF / ESIC authority. 20.3 Our findings The Ld. Assessing Officer observed that the amount of wages was increased from Rs. 40,30,663/, to Rs. 52,81,000/- and no register were maintained by the assessee. The said version of the assessing officer is factually not correct as the assessee has properly maintained wages register and on entire amount of wages Provident Fund (In short 'PF) and Employees State Insurance Contribution (In short 'ESIC') is deducted and paid. The amount of wages was increased due to increase in the wage rate in this year as compared to last year. Salary sheet prepared in excel with the corresponding challans of PF and ESIC are placed on record. Copy of statement showing the Month, Number of Employees, total wages paid and average wages paid by the assessee is filed and on perusal of the same we find that the amount of average wages paid by the assessee increased in this year. Under th....
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....ng the anomaly in gas and fuel expenses has no merits. 22. The amount of excise duty was not included in the figure of closing stock as per provision of section 145A of the Act. 22.1 Observation of Ld. A.O. The assessee company has not included excise duty component while calculating the closing stock and claimed that the company has maintained closing stock of exclusive method. Section 145A of Income Tax Act provides that the inventory worked out in accordance with the method of accounting regularly employed by the assessee must be further adjusted to include the amount of any cess, duty or tax actually paid or incurred. The relevant provisions 145 of the LT Act are as under: 145A (a). Notwithstanding anything to the contrany contained in section 145 (a) the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head I Profits and gains of business or profession I shall be in accordance with the method of accounting regularly employed by the assessee; and further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to t....
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.... company till the date. 23.2 Submission made by Ld. Counsel for the assessee: The amount of sundry creditors outstanding for more than three years old and not payable was written off in the books of account by the assessee voluntarily. The assessee in this year also written off an amount of Rs. 1,53,02,916/- in its books of account 23.3 Our findings Ld. A.O on observing that some of the sundry creditors are outstanding for 2 to 3 years raised concern about their genuineness. It was brought to our notice by Ld. Counsel for the assessee that past few years have been a difficult time in steel industries there was a steep fall in the steel prices. Payment to creditors were delayed due to lack of funds. Negotiations were made for decrease in the purchase amounts. In some cases due to poor quality there was some disputes with the creditors and amount was not paid. The assessee has voluntarily written off some of the creditors appearing in its book of accounts which are more than 3 years old and the same have been credited to the Profit & Loss account. It thus shows that in normal course of business such entries occurs as most times the creditors are not paid due to poor inability o....
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....so depends upon the quality of raw material purchased by the assessee. The percentage of burning loss in case of URD purchase is comparatively higher than scrap purchased from registered dealer or from industries. Ld. Departmental Representative also could not controvert the fact that the percentage of burning loss shown by the assessee has been duly accepted by the Excise Department in this year as well as in the previous years. It seems that Ld. A.O was not clear about the type of business the assessee is engaged into as he has adopted the basis of iron industries whereas the assessee is into the business of rolling mills. The percentage of burning loss shown by the assessee is commensurate to the burning loss shown in other rolling industries. We thus find no defect in the books of account with regard to the claim of burning loss and the yield shown during the year. 25. The assessee has received shown cause notice from the excise department wherein total turnover of Rs. 94.79 crores were noticed during the A.Ys 2010-11 to 2012-13. 25.1 Observation of Ld. A.O Here it is pertinent to mention that the case of Assessee Company the central excise department has conducted search....
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....ding of Customs, Excise & Service Tax Appellate Tribunal (In short 'CESTAT') in its order dated 27.9.2018 is at page 25 placed at page 85 and 86 of the paper book and reads as follows:- "25. In view of aforementioned facts and settled position of law, we hold that the allegation of clandestine manufacture and removal of TMT bars, made in the SCN, on ASPL is merely on assumption and presumption without any material evidence corroborating the said allegation. The demand of duty on ASPL, therefore, is not sustainable. As demand of duty itself is not sustainable, no interest or penalty could be imposed on ASPL as well as on other appellants on whom penalties were imposed under Rule 26 of the Central Excise Rules, 2002 and for this reason we are not dealing with their appeals separately". From the above finding of CESTAT it is clear that the assessee has been held to have made no unaccounted turnover in the assessment year 2010-11 to Assessment Year 2012-13 and assessee has been given a clean chit. Therefore the basis of Ld. A.O of questioning the correctness of the turnover of the instant assessment year is not correct and thus liable to be dismissed as the assessee has succeeded....
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....ss Excise duty 7,84,34,016 8,53,32,420 Net sales(Net of excise duty) 63,17,42,669 82,56,87,721 2.1 Opening stock of finished goods 9,50,09,003 7,04,04,995 2.2 Raw material consumed 42,69,63,302 58,35,25,790 2.3 Traded Goods purchased 12,58,499 10,24,716 Total 52,32,30,804 65,49,55,501 2.4 Less closing stock of finished goods 11,15,55,115 9,50,09,003 Cost of goods sold 41,16,75,689 55,99,46,498 Margin on sale of goods prior to direct expenses 22,00,66,980 26,57,41,223 % of margin 34.83% 32.18% In view of the above, the assessee earned higher rate of profit on sales made by it. But, due to heavy direct expenses the amount of losses was incurred in this year as compared the same with the last year. Comparative chart of Direct expenses incurred by the assessee vis-a-vis the sales is shown below:- S.No. Particulars 31.03.2013 31.03.2012 1.1 Gross Sales 71,01,76,685 91,10,20,141 1.2 Less Excise duty 7,84,34,016 8,53,32,420 Net sales(Net of excise duty) 63,17,42,669 82,56,87,721 2.1 Opening stock of finished goods 9,50,09,003 7,04,04,995 2.2 Raw material consumed 42,69,63,302 58,35,....
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....t of preceding year and current year which have been arrived on the basis of regular books of accounts and quantitative details maintained by the assessee are in itself loud and clear to state that the percentage of margin has increased during the year but the percentage of direct expenses have increased much more than that which has resulted into losses. All the discrepancies observed by the Ld. A.O have been duly rebutted by the facts of the case which shows that the assessee has properly maintained the books of accounts and the Ld. A.O was not justified in rejecting the same and estimating the profits. Also the basis taken by the Ld. A.O about the alleged unaccounted turnover observed by the Excise Department is no more a good basis since the assessee has succeeded before CESTAT and the alleged show cause notice for the unaccounted turnover has been quashed. We have gone through each and every fact relating to the observation made by Ld. A.O and come to the conclusion that no such discrepancy existed and we are thus satisfied with the losses incurred during the year. We thus set aside the finding of Ld. CIT(A) and are of the considered view that Ld. A.O grossly erred in rejectin....