TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 1269
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....irm engaged in the business of trading of drugs and medicines and allied products including its distribution and also act as a stockiest for allopathic medicines. The assessee has filed its return of income on 24.09.2015 declaring total income of Rs 3,47,26,760/-. During the year under consideration, a survey u/s 133A was carried out in the premises of the assessee on 14.10.2014 wherein certain discrepancies were observed in the stock and cash balance which was voluntarily surrendered and offered for taxation. Thereafter the case of the assessee was selected for scrutiny and notice u/s 143(2) dated 28.09.2016 was issued to the assessee. 3.1 The AO vide notice dated 22.12.2017 alleged that the assessee has lowered his profits by manipulating its books of accounts by deflating partners' remuneration and inflating other expenses to artificially compensate for the income surrendered by the assessee on account of survey done in the month of October 2014. The AO also alleged that the net profit figure reported by the assessee is tainted and asked the assessee to show cause why the books of accounts be not rejected u/s 145(3) of the Act. 3.2 In response to the notice the assessee fi....
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....which are placed at PB Pg. 231 and PB Pg. 232-233 respectively. Increase in Charity & Donation- The assessee has submitted complete details of donations made during the year which are placed at PB Pg.214. These donations have been made via banking channels as is evident from the ledger A/c of Charity & Donation Expenses placed at PB Pg.215. Relevant donation receipts have also been submitted by the assessee which are placed at PB Pg. 217-219. However, these expenses have been voluntarily added while computing taxable income as is evident from computation of income placed at PB Pg.2. Increase in Bad Debts -due to recoverability of funds. The assessee had also filed a suit against those parties but could not recover any amount since those parties absconded. Therefore, the assessee had written off those amounts as bad debts in the books of accounts. Increase in Interest to Partners - Paid/credited in accordance with partnership deed. Apart from the increase in abovementioned expenses, various other expenses had increased/decreased normally whose net adverse impact on the profitability comes to Rs.20,79,194/-. The assessee also submitted a comparative chart of expenses incurred for....
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....Specialty Hospital appeared before AO. A copy of remand report dated 22.04.2019 is placed at PB Pg. 452. 6. Observation of AO; The GP rate should have risen on account of lesser sale transactions with Max healthcare which was yielding lower GP (5.19%) than the overall GP (FY 2013-14: 6.38%). 6.1 Response of assessee; The AO has failed to notice that it is the sales of institutional buyer which had reduced, In order to compensate such reduction in sales the assessee sold its products to customers, Sale of products to customers did not yield a gross profit margin equal to the margin from institutional buyers and thus it had resulted in overall decline in GP Margin. Therefore, AO had misinterpreted the facts by holding that GP Rate should have rather increased on account of discontinuance of sale to Max Healthcare. Moreover, the GP Rate had consistently been falling over the preceding years. 7. Ld. CIT(A) considered the detailed submissions and justification provided by the assessee and has categorically held that the rejection of Books of Accounts was not justified. Relevant finding as appearing at. Pg. 10 of the CIT(A) order is reproduced below: "Every year is a different year ....
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....grieved by the order of CIT(A), Revenue filed an appeal raising following grounds of appeal; "1. On the facts and circumstances of the case, whether the Ld. CIT(A) has erred by holding that the AO was not justified in rejecting the books of accounts of the assessee by invoking provision of section 145(3) of the I.T. Act, 1961, in spite of following facts:- (i) During the course of survey, discrepancies were noticed in stock and cash. Stock on physical verification was found excess by Rs. 2,20,00,120/- and cash on physical verification was found excess by Rs. 40,00,000/-. (ii) The assessee has declared lesser commission income during the year under consideration as compared to earlier years income. (iii) The assessee has inflated the expenses debited in profit and loss account during the year. 2. On the facts and circumstances of the case, whether the Ld. CIT(A) has erred by deleting the additions made by AO @ 5.206% on account of Net Profit. 3. On the facts and circumstances of the case, whether the Ld. CIT(A) has erred by deleting the additions made by AO of Rs. 2,05,29,361/- on account of Net Profit. 4. The appellant craves, leave to add, to alter or amend any....
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....ed by Ld. AR on the following judicial pronouncements in this regard : * The Pr. Commissioner of Income Tax-17 versus Time & Space Haulers, 2018 (7) TMI 1997-Bombay High Court, Dated 4.7.2018 * The Commissioner of Income Tax Versus Om Overseas, Shiv Nagar 315 ITR 185 High Court Punjab and Haryana * Assistant Commissioner of Income Tax, Raipur versus Roopchand Tharani, 2011(11) TMI 426-Chhattisgarh High Court, Dated 1.11.2011 * Madnani Constructions Corporation P. Ltd. Versus Commissioner of Income-Tax, 2006 (12) TMI 79-Gauhati High Court, Dated - December 5, 2006 13. Further, it is a settled law, as cited by Ld. AR, that merely because the Net Profit has declined, the AO cannot resort to rejecting the books of accounts. Reliance is rightly placed on the following judicial pronouncements in this regard: * The Pr. Commissioner of Income Tax-9 Versus IBILT Technologies Ltd. 2018(10) TMI 63-Delhi High Court, Dated - 12-09-2018. * CIT versus Winner Constructions Pvt. Ltd., 2012 (5) TMI 394-Delhi High Court, dated- May 3, 2012 * Commissioner of Income Tax-XII versus Smt. Poonam Rani, 2010 (5) TMI 57-Delhi High Court, wherein the court held as under "8. The fall in gross ....