TaxTMI 
TaxTMI 
2022 (9) TMI 1245
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....ified in deleting the addition of Rs.3,51,57,284/- made on account of estimation of gross profit after rejecting the books of accounts u/s 145(3) of the Act when in fact, the assessee has not maintained stock register as well as assessee was unable to explain various discrepancies pointed out by the A.O during the assessment proceedings? 2. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is justified in deleting the addition of Rs.26,94,870/- made by the A.O on account of under valuation of excess stock found during the course of survey at shop premises of the assessee @ Rs.32.44 per meter as adopted by the assessee in the audited books of account, on being found that the valuation adopted by the survey team on excess stock was at lower rate of Rs.28.30 per meter, which was based on unaudited accounts? 3. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is justified in deleting the addition of Rs.24,63,328/- made by the A.O on account of under valuation of chemical stock found at the premises of the assessee by applying the FIFO method as against the average weighted method adopted by the assessee, ignorin....
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....,245/- in the working of G.P. which would have resulted in further drastic fall in G.P margins in the year. In respect of fall in G.P. margin the assessee has stated that during the year under consideration the assessee had carried out manufacturing activity for the whole year, whereas in the preceding year the same was carried out for two months only and requested to accept the G.P margin shown. Therefore, the assessing officer has issued show cause letter dated 10.03.2015 to the assessee. 5. In response, the assessee submitted before the assessing officer written submissions and explained the reasons to fall in gross profit ratio. The reply of the assessee is reproduced in assessment order in para no.15 at page no.14 of the assessment order. The assessee has stated before AO that in the preceding year, the nature of business activity was predominantly of trading and manufacturing activity which were started only at the fag end of the year. It was further stated that manufacturing activity would require more manpower and consequently higher labour cost whereas in trading business lesser manpower was required and lower manpower cost. The assessee therefore, concluded that if emp....
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....other hand, Shri Mehul Shah, Learned Counsel for the assessee, argued that there is no defect in the books of accounts maintained by the assessee and in fact the discrepancy in the books of account, if any, till the date of survey is taken care of by the disclosure of income of Rs.2,02,13,906/- by assessee, which were incorporated in the books of accounts and the AO has also not pointed out any valid defects in books of accounts. Various decisions in respect of rejection of books of accounts u/s 145(3) of the Act were produced by the assessee before the Appellate authority in support of its contention. After going through the assessee`s submission, the Ld. CIT(A) has observed that while doing scrutiny in the case of assessee for the assessment year 2014-15, the G.P of 11.82 % was accepted. If the G.P is re-worked by the AO after adding the disclosure the same comes to 14.23% which is quiet reasonable. The ld Counsel also pointed out that assessee is following the same method of accounting and books of assessee were accepted in subsequent assessment year AY 2014-15. Hence, in view of these facts, the Ld. CIT(A) has deleted the addition made on account of low G.P. therefore his order....
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....f manufacturing activities as the plant was commissioned in November 2010 of last year. iii. In preceding year, a major fire broke out so it can be said to be an abnormal year and not fit as comparable. The Ld CIT(A) noted that Assessing Officer in the show cause notice has stated that "the job work receipts have increased by more than 30 times from 16,14,100/- in the preceding year to 5,15,38,821/- which shows that assessee has claimed disproportionate expenses during the year. But increase in job work receipts cannot prove any claim of disproportionate expenses. This observation of Assessing Officer rather proves the contention of the assessee that this is the first full year of job work manufacturing and hence comparison of GP of last year is not valid. Therefore, ld CIT(A) held that business situations can never be so static so as allow such arithmetical precision in GP computation, hence the books of accounts cannot be rejected u/s 145(3) on such technicalities alone. The Assessing Officer has also stated in the show cause notice that the stock register is not maintained along with other technical defects and the assessee in its reply has given categorical rebuttal....
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.... of books of account and further no evidence had been brought on record to substantiate allegation of unrecorded sales - He thus by a well-reasoned order, deleted addition - Whether Commissioner (Appeals) and Tribunal were correct in holding that there was no case for making addition on basis of gross profit rate - Held, yes [Para 4] [In favour of assessee]." (2) PCIT vs. Purshottam B. Pitroda [2017] 82 taxmann.com 18 (Gujarat) wherein it was held that: " Section 145 of the Income-tax Act, 1961 - Method of accounting (Estimation of income/Gross profit rate) - Assessment year 2007-08 - During relevant year assessee declared Gross profit at 48.39 per cent - Assessing Officer after rejecting books of account, estimated Gross profit at 53.32 per cent by considering only overall Gross Profit Ratio declared in earlier years for same project - Assessing Officer had not properly appreciated whether or not expenditure might have increased and/or might be for some or other reason profit might have decreased - Tribunal found that for year under consideration income of assessee had increased - Tribunal held that there was justification in decrease in gross profit and, Assessing Off....
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....hown gross profit ratio at 18.49 per cent and net profit ratio at 0.71 per cent - Assessing Officer held that such gross profit ratio and net profit ratio were very low and determined income by adopting net profit ratio of 5 per cent on net sales - Whether when Assessing Officer could not point out any defect in details filed by assessee, addition made on account of low gross profit ratio could be sustained - Held, no [Para 13] [In favour of assessee.]" 14. Based on these facts and applicable case law on facts, the ld CIT(A) noted that assessee's books of accounts have been rejected solely on the basis of low profit rate without pointing out any specific defect in the assessee's books of account which is contrary to the legal and settled principles of law as enumerated in Section 145(3). The ld CIT(A) held that there is no violation of any prescribed accounting standard and further the books of accounts cannot be termed as incomplete or incorrect as per the judicial precedents above. Specifically, in the decision of Coordinate Ahmedabad Bench in case of Mayankkumar Natwarlal Soni vs. ACIT [2019] 111 taxmann.com 6 (Ahmedabad - Trib.) also, there was survey operations wher....
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....ntenance of stock register and deficiency in sale price etc. are taken care of by the disclosure in the course of survey because the impact of profit by applying GP rate is much less than the disclosure made by the assessee. We, therefore, hold that for the pre survey period book results of the assessee should be accepted." 16. During the appellate proceedings, the assessee has submitted the Chart of GP of subsequent years, which is reproduced below: A.Y. Turnover(in Rs.) Gross Profit(in Rs.) Gross Profit (in%) 2013-14 71,36,50,928/- 9,02,97,102/- 12.65% 2014-15 98,88,88,659/- 11,68,57,794/- 11.82% With help of the above chart, during the appellate proceedings, the assessee has argued that the case of A.Y 2014-15 was subjected to scrutiny wherein the GP of 11.82% was accepted. Hence, ld CIT(A) noted that there is force in the arguments of the assessee that there is no fall in the GP of the post survey period. The assessee has shown overall GP of 17.14% as per tax audit report during the year under consideration and even otherwise, if the GP re-worked by the Assessing Officer is considered after adding the disclosure income which is business....
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....s by the survey team, the declaration of Rs.2,02,13,906/- could be made. The Assessing Officer cannot be expected to brush aside the valuation done by survey team to enhance the valuation without pointing out any defect in the valuation done by survey team. Therefore, ld CIT(A) held that there is force in the argument of the assessee that the issue of valuation is revenue neutral in as much the value of closing stock on the date of survey becomes the opening stock of the post survey period and the same is captured either in Sales with profit margin or in closing stock at same value and hence there is no effect on the profit and loss account per se. Therefore, based on this factual position, ld CIT(A) deleted the addition. That being so, we decline to interfere in the order of ld CIT(A) and dismiss the ground raised by the Revenue. 23. Ground no.3 raised by the Revenue relates to deletion of addition of Rs.24,63,328/- made by AO on account of under valuation of chemical stock. 24. Brief facts qua the issue are that assessee has adopted weighted average method for valuation of closing stock whereas according to assessing officer if assessee had adopted FIFO method, then his clo....
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....ts qua the issue are that during the assessment proceedings, the assessing officer observed that the figure of 1,66,59,433.25 mtr @ 18.81/- per meters of grey valued at Rs.31,34,32,347/- is gross purchase quantity and on comparison with the figure of 1,65,42,201 mtr @ 18.81/- per metres valued at Rs.31,11,58,800/- as per audit report, therefore the difference of 1,17,232.25 mtr @ 18.81/- valued at Rs.22,05,138/- was added by the assessing officer in the income of the assessee. 30. On appeal, the ld. CIT(A) deleted the addition made by the Assessing Officer, therefore Revenue is in appeal before us. Learned DR for the Revenue submitted that on perusal of the month wise purchase details submitted by the assessee and the details mentioned in audit report, it was noted by AO that, assessee has shown total purchase of 1,66,59,433.25 meters of grey valued at Rs.31,34,32,347/- @ 18.81 per meter whereas in the audit report, assessee has shown total purchase of 1,65,42,201 mts. No explanation was offered for the discrepancy found of 1,17,232.25 Meters. Hence, the difference noticed in meters was calculated by the AO at the same rate of 18.81 per meter and added to the income of the asses....
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....eived from six parties, unsecured loan amounting to Rs.8,88,000/- was found to be not genuine. On verification of the banks statement of lenders, it was found that before issuing every cheque to the assessee, there would be some immediate cash deposits. The assessee has failed to establish the nature of these cash deposits before the AO. Hence, AO has observed that, assessee has not justified with the provisions prescribed in section 68 of the Act. Therefore, Creditworthiness and genuineness of these transactions remains unexplained. Hence, the amount of loan of Rs.8,88,000/- received from six parties were disallowed and added to the income of the assessee u/s 68 of the Act as the same was found as unexplained. Therefore, the findings of the assessing officer may be upheld. 35. On the other hand, ld Counsel for the assessee submitted that all the parties are assessed to tax and the assessee has also submitted account confirmation, contra confirmation, bank statement, balance sheet and the copy of the return of income with the computation of income of parties. Further the supporting documents filed during assessment proceedings are given below: Name of parties Addition of l....
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....ell as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer by sustaining the addition of Rs. 13,14,158/- being alleged unaccounted investment in finished stock. 2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer by sustaining the addition of Rs. 2,85,174/- being alleged unexplained capital expenditure. 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer by sustaining the addition of Rs. 48,855/- being alleged late payment of PF and ESIC. 4. It is therefore prayed that addition made by the assessing officer and confirmed by CIT(A) may please be deleted or the matter may please be set aside to the file of CIT(A). 5. Assessee craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal." 39. At the outset, Learned Counsel informs the Bench that assessee does not wish to press ground no. 1 of his Cross Objection, therefore we dismiss the ground no. 1 raised by th....
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....te payment of PF and ESIC. 48. We have heard both the parties. The ld. Counsel for the assessee fairly agreed that issue is squarely covered by the judgment of the Co-ordinate Bench in the case of Rekha R. Shukla (in ITA Nos. 147 & 234/SRT/2021), wherein the Tribunal has remitted the issue back to the file of the ld. CIT(A), observing as follows: "12. Therefore, as per the above, judgment of the Hon'ble jurisdictional High Court in the case of Gujarat State Road Transport Corporation (GSRTC), the claim of the assessee is not allowable. 13. We note that Hon`ble Jurisdictional High Court of Gujarat in the case of Salasar Laminates Ltd. Vs. Dy. CIT (Tax Appeal No. 1186 of 2018), has granted liberty to the assessee that if the Supreme Court reverse the judgment in the case of GSRTC, it would be open for the assessee to revive the appeal. The findings of the Hon`ble Court is reproduced below: "This Appeal is filed by the assessee to challenge the judgment of the Income Tax Appellate Tribunal, Ahmedabad {"Tribunal" for short} dated 22nd March 2018. The issue pertains to Assessment Year 2013-14 and the sole question raised by the assessee in this appeal c....
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....f Gujarat in the case of Salasar Laminates Ltd (supra) all these appeals is restored to the file of the ld CIT(A) with the direction to adjudicate the issue as per the outcome of the decision of the Hon`ble Supreme Court. 15. We also note that on identical facts, similar issues have been remitted back to the file of the ld. CIT(A) by the Co-ordinate Bench of ITAT Surat, in the case of Puja Chemicals in ITA No.161 & 162/SRT/2021. The findings of the Tribunal is as follows: "5.We have heard both the parties and perused the material available on record. We note that the issue involved in these four appeals are covered against the assessee, as the assessee has not deposited Employees Provident Fund (EPF) with the prescribed authority within stipulated time, therefore as per the judgment of the Hon'ble Gujarat High Court in the case of Gujarat State Road Transport Company (supra), the issue had already been decided by the Hon'ble Court against the assessee. However, we note that jurisdiction ITAT, Ahmedabad in the case of M/s Unicorn Remedies Pvt. Ltd. in ITA Nos. 3058/AHD/2014 for AY.2011-12 and 2599/AHD/2016 for AY.2012-13, order dated 30.01.2019 wherein the ....
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....ity of a sum of Rs.20,34,916/- which was the employees' contribution towards Provident Fund, ESI, etc. It appears that the assessee did deposit such amount of contribution towards PF & ESIC accounts, however, missed the deadline prescribed in the statutes for such purpose. On account of this, the Revenue C/TAXAP/1186/2018 ORDER did not permit deduction of such sum from the income of the assessee. Such disallowance thereupon became the subject matter of appeal before the Tribunal. The Tribunal dismissed the ground, relying upon the judgment of this Court in the case of Commissioner of Income-tax vs. Gujarat State Road Transport Corporation Limited, reported in 366ITR 170 [Gujarat]. Counsel for the assessee did not dispute that the issue on hands is squarely covered by this Court in the case of CIT v. GSRTC [Supra]. He, however, submitted that the appeal is pending against the judgment of the High Court before the Supreme Court and SLP has been granted. The amount involved is not very large and it would be extremely expensive for the assessee to carry this in appeal before the Supreme Court. He, therefore, suggested that the benefit of this judgment of the Supreme Court ....
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.... (a) The law declared by the Supreme Court being binding on all Courts in India, the decisions of the Supreme Court are binding on all Courts, except, however, the Supreme Court itself which is free to review the same and depart from its earlier opinion if the situation so warrants. What is binding is, of course, the ratio of the decision and not every expression found therein. (b) The decisions of the High Court are binding on the subordinate Courts and authorities or Tribunals under its superintendence throughout the territories in relation to which it exercises jurisdiction. It does not extent beyond its territorial jurisdiction. (c) The position in regard to binding nature of the decisions of a High Court on different Benches of the same Court, may be summed up as follows : (i) A Single Judge of a High Court is bound by the decision of another Single Judge or a Division Bench of the same High Court. It would be judicial impropriety to ignore that decision. Judicial comity demands that a binding decision to which his attention had been drawn should neither be ignored nor overlooked. If he does not find himself in agreement with the same, the proper p....
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....roughout the territories in relation to which it exercises jurisdiction. Hence, decision of the Hon`ble Jurisdictional High Court of Gujarat in the case of Gujarat State Road Transport Corporation(supra), is binding on us. 19. In the case of Union of India v. Raghubir Singh (1989) 178 ITR 548 (SC), the Hon`ble Supreme Court held that the doctrine of binding precedent has merit of promoting certainty and consistency in judicial decisions. As per the doctrine of precedent, all lower Courts, Tribunals and authorities exercising judicial or quasi-judicial functions are bound by the decisions of the High Court within whose territorial jurisdiction these Courts, Tribunals & authorities functions. In the case of State of Orissa & Ors. v, M.D. Illyos, [2006] 1 SCC 275 the Hon`ble Supreme Court held that a decision is a precedent on its own facts and that for a judgment to be a precedent it must contain the three basic postulates: (i)A finding of material facts, direct and inferential. An inferential finding of fact is the inference which the Judge draws from the direct or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the ....