TaxTMI 
TaxTMI 
2021 (3) TMI 588
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.... Ld CIT[A[ erred in rejecting the ground of appeal wherein 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 pro....
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....ed by the Ld CIT(A) both the assessee and department both are in appeal before the Tribunal. 7. We will first take up the assessee's Appeal ITA No. 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 co....
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....from page 1 to 106 took us through all as well as the observation made by the Ld. A.O are contending that the allegation made by the Ld. A.O have no merit and the book results ought to have been accepted. Ld. Counsel for the assessee submitted 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 findi....
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....d made its purchases through its trading Division and booked freight expenses in his books. Therefore this defect pointed out by Ld. A.O is not correct. 17. Freight receipt in case of scrap purchased from M/s Hothour Ispat P Limited not found available. 17.1 Observation of Ld. 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 rec....
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....Observation of Ld. A.O The company has claimed freight inward charge of Rs. 2,10,99,914/- whereas the last financial year shown to Rs.l,92,59,266/-. On verification of this account it was noticed that the assessee company has made most of the payment in cash. On perusal of payment vouchers it was noticed that all the vouchers were found unsigned and without revenue 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 die....
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....ayment registers maintained by the company and the company has only produce ledger in which month wise consolidated payment reflected. Except month wise summary nothing was produced for verification. 20.2 Submission made by Ld. Counsel for the assessee: The amount of wages as paid by the assessee was increased due to increased in the rate of wages as paid and for new employment. The assessee 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 i....
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....ear but there is an increase in the price of gas supplied by GAIL. This fact has not been rebutted by Ld. Departmental Representative. There is increase in the gas and fuel expenses incurred by the assessee during the year even though the turnover has decreased, but the increase in price is beyond the control of the assessee. We therefore find no reason to doubt the genuineness of gas and fuel expenses incurred during the year. This fact noticed by Ld. A.O regarding 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). Notwithstand....
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....ction 145A of the Act. 23. Sundry creditor shown outstanding for last two to three years old. 23.1 Observation of Ld.A.O. (viii) On perusal of creditor list submitted by the company it was noticed that some creditors are shown very old and the assessee has continuously claimed the same as liability. M/s Janki Ispat P. Ltd. amounting to Rs. 2,00,966/- shown same from 31.03.2011 to till date. Similarly, some other creditor shown same from 31.03.2012 and 31.03.2013 and no proof of payment furnished by the 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. Pa....
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....made by Ld. Counsel for the assessee that in Iron industries scrap/burning loss varies between 4 to 6% but in case of rolling mills, the percentage of scrap is at two stages, one at the stage of consumption of scrap to produce MS Ingots and second stage from consumption of MS Ingot to Steel Bar. The percentage of burning loss during the process from Scrap to MS Ingot varies between to 5 to 7% and also from Ingot to Steel Bar the percentage of burning loss is around 6%. Hence, in one stage the percentage of burning loss is around 6 only. The percentage of burning loss also 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 ....
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....4. 25.3 Our findings We observe that the Ld. A.O raised concern about the correctness of the sales turnover shown by the assessee on the basis of proceedings carried out by Excise Department in the case of assessee for Assessment Year 2010-11 to Assessment Year 2012-13 alleging that the assessee had unaccounted sales turnover of 94.79 crores. The show cause notice was issued on the basis of presumption and the same was also challenged by the assessee company before CESTAT. CESTAT vide its order dated 27.9.2018 has quashed the show cause notice as issued by the Commissioner of Central Excise & Customs. The relevant finding 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....
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....ssessing officer observed that the total turnover of the assessee company has reduced from Rs. 91.10 crores to Rs. 63.18 crores. This is the factual finding and for this reason only, the assessee company incurred huge losses. As claimed by Ld. Counsel for the assessee due to very low demand of the product of the assessee, the fixed expenses as incurred by the assessee remained same or rather increased in this year and this was the main reason for incurring losses.. The assessee has not incurred losses as far as consumption of material with corresponding sales are concerned, the same is verifiable from the following chart:- 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 58,35,25,790 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....
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.... Machinery repairs & maintenance exp 5,16,792 1,01,053 8 Water charges 2,05,274 2,43,020 9 Municipal taxes 7,42,004 NIL 10 Electricity expenses 4,95,565 29,02,91,777 26,31,42,343 That on perusal of the above, we find that major expenses have increased in this year as compared to last year. The sales in the case of the assessee was duly accepted by the sales tax department, copy of sales tax order passed along with reconciliation statement is placed before us. We observe that the assessee has written off the amount not payable on account of Freight and sundry creditors and shown the same as its other income. Since, the said amount is directly related to the purchase and freight both the amount relates to the direct expenses. Hence, the amount though credited in the Profit & Loss account directly relates to the trading activities of the assessee company and rightly considered for calculating the gross profit. 27. The comparative charts of various items of manufacturing, trading and profit and loss account of preceding year and current year which have been arrived on the basis of regular books of ac....