TaxTMI 
TaxTMI 
2024 (12) TMI 504
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....s a company incorporated in the year 2005 under Companies Act, 1956. Assessee is engaged in the business of export of meat and meat products to various countries across the world. The assessee has integrated slaughtering-cum-meat processing plant at Aligarh (UP). The primary input for processing is purchase of raw meat from various suppliers. The meat is purchased from suppliers after slaughtering on the basis of weight of the carcass in accordance with per kg. basis. The Assessing Officer observed that during the year under consideration, the assessee has declared Gross Profit (GP) and Net Profit (NP) percentage at 5.89% and 1.72% respectively. AO observed that in the preceding year, the GP and NP rate declared by the assessee are 7.19% and 2.35% respectively. Therefore, he observed that there is an abnormal down fall in the GP and NP declared by the assessee. In order to verify the same, he verified various documents submitted by the assessee electronically. During the assessment proceedings, assessee was asked to submit confirmation of persons from whom assessee purchased meat, necessary certificate of Veterinary Doctor as required under Rule 6DD read with section 40A(3) of the ....
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....lant since no any particular defect or discrepancy in the account books maintained by the appellant has been found by Ld AO And if the rate of GP declared by the assessee in a particular period is lower as compared to the gross profit declared by him in the preceding year, that may alert the Assessing Officer and serve as a warning to him to look into the accounts more carefully and to look for some material which could lead to the conclusion that the accounts maintained by the assessee were not correct, but a low fate of gross profit, in the absence of any material pointing towards falsehood of the account books, cannot, by itself, be a ground to reject the account books under section 145(3). He submits that this observation is applicable to the facts of appellant's case and the ruling supports the facts of the present case. 6.11 Ld. AR submits that in any case the appellant IS also entitled to deduction u/s 80IB of the Act upto 100% of its business income. This fact further strengths the case of the appellant as the appellant had no incentive in disclosing a wrong business income as no tax was payable on its income. Ld. AR further submits that Ld AO has not allowed claim of....
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.... been declined due to decline in export sales however looking to the facts and circumstances of the case, it is concluded that the appellant could not explain the downfall in NP margin to the extent of 0.10% of total turnover i.e. 1028.11 crores This is computed at Rs. 1,02,81,100/-. Therefore addition of Rs. 1,02,81,100/- is upheld out of total addition made by the Assessing Officer. However the AO is directed to give the benefit of deduction in the profits and gains derived from eligible business in accordance to provisions of section 80IB of IT Act. As per this section, the appellant is eligible for 100% deduction on the profit from the eligible business. In the assessment order it has been found that Ld. AO has computed NP by rejecting books of accounts at Rs. 41,12,46,052/- and Since the appellant has shown NP of Rs. 17,64,57,430/-, net addition of Rs. 23,47,88,621/- has been made. However the computation of claim of deduction u/s 80IB of IT Act has not been made by considering the profit and gains estimated by Ld. Assessing Officer. Therefore ld. AO is directed to compute claim of Deduction u/s 80IB of IT Act on the profits and gains derived from the business after considerin....
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....derived from the business after considering the sustained addition as per law is also not justified as during assessment proceedings, no documentary proof regarding assessee's claim of deduction u/s 80IB (IIA) was furnished." 6. At the time of hearing, ld. DR for the Revenue brought to our notice findings of the Assessing Officer from pages 5 to 13 of the assessment order and further brought to our notice findings of the ld. CIT (A) and he vehemently argued that the assessee has not submitted any document or any material before the Assessing Officer and ld. CIT(A) has accepted the submissions of the assessee on face value. 7. On the other hand, ld. AR for the assessee submitted written submissions and submitted that assessee has explained various reasons for falling profit compared to earlier assessment years, therefore, he supported the findings of the ld. CIT (A). For the sake of clarity, written submissions filed by the ld. AR for the assessee is reproduced below :- "That appellant filed return of income for A.Y. 2017-18 declaring of income Rs. 8,76,98,220. Assessment u/s 144 of I.T.Act 1961 was made on an income of Rs. 32,24,86,850. A major addition is on account of inc....
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....ppliers of animals is filed herewith (page 57 to 68). The PAN and address of all the big suppliers is mentioned therein. In other cases, the Adhaar No and address are mentioned. Because they are all from rural backgrounds hence some of them don't have a PAN. The total animal purchases during the year are Rs. 830,79,91,540 out of which only Rs. 2,75,84,836 is by way of cash payment, which is a mere 0.33 % of the total purchases, rest 99.67 % is through bank. (4) That without prejudice to the above submissions, mere fall in NP rate cannot form basis for an addition. The account books are duly audited, and major component of the sales are exporting the proceeds of which are received only through banking channel and is easily verifiable. Even the domestic sales are fully vouched and verifiable all the sales are through banking channel. Ld. A.O. has not found any discrepancy in the sales. He did not find any particular deficiency or mistake in the books of accounts which were duly produced before him. Reasons for fall in N.P. and G.P. rates Comparative figures A.Y. Total Turnover G.P. Rate N.P. Rate 2013-14 719,97,58,715 8.46 % 4.34 %. (Assessed after search) 2014-1....
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....o 80) of persons to whom payment was made in cash above Rs. 20,000 in a day. The gross amount payable to such persons was Rs. 4,26,25,634 out of which an amount of Rs. 2,75,84,836 was paid in cash while rest Rs. 1,50,40,798 was paid through bank. Ld. A.O. has wrongly taken the gross figure of Rs. 13,51,80,989 instead of correct figure of Rs. 4,26,25,634, he has accordingly taken a wrong figure of Rs. 12,01,40,188 (13,52,80,989 - 1,50,40,798) as cash payment instead of correct amount of Rs. 2,75,84,836 only. The total animal purchases during the year is Rs. 830,79,91,540 out of which only Rs. 2,75,84,836 is by way of cash payment which is a mere 0.33 % of the total purchases, rest 99.67 % is through bank. Moreover, as per rule 6DD(e)(ii) the payment in cash is allowed for purchase of animal husbandry products including livestock, meat etc. So even the cash purchase was legally allowed and there was no scope for doubting the account books. Account books along with substantial amount of vouches, stock register and purchase register were produced before the A.O. during assessment proceedings. Relevant extract of rule 6DD(e)(ii) is as follows 6DD. No disallowance under sub-section (....
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....ion, the Hon'ble Delhi High Court has dealt with the issue elaborately. In the case of CIT vs Smt Poonam Rani [2010] 192 TAXMAN 167 (DELHI), wherein the Officer had rejected the books because of the quantitative variation in the weight of the output products as against input items, the High Court rejected the addition made on estimate basis because no defect was pointed out in the accounts and there was no basis for estimation. The observations of the High Court are reproduced as below: (i) The Assessing Officer had not pointed out any particular defect or discrepancy in the account books maintained by the assessee. During the course of hearing before the Commissioner (Appeals), it was pointed out by the assessee that her account books were duly audited under Section 44AB of the Central Excise Act and the quantitative details as required by clause 28(b) of Form No. 3CD regarding raw material and finished products were prepared and audited by certified accountant and were enclosed with Form No. 3CD which had been placed on record. (ii) As regards the marginal increase in the weight of the finished product, the explanation given by the assessee had been accepted not only by the C....
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....t was not possible to deduce the true income of the assessee from the accounts maintained by her, nor the accounts could be said to be defective or incomplete for that reason alone. (xiii) If the stock register is not maintained by the assessee, that may put the Assessing Officer on guard against the falsity of the return made by the assessee and persuade him to carefully scrutinize the account books of the assessee, but the absence of one register alone does not amount to such a material leading to the conclusion that the account books were incomplete or inaccurate. (xiv) Similarly, if the rate of gross profit declared by the assessee in a particular period is lower as compared to the gross profit declared by him in the preceding year, that may alert the Assessing Officer and serve as a warning to him to look into the accounts more carefully and to look for some material which could lead to the conclusion that the accounts maintained by the assessee were not correct, but a low rate of gross profit, in the absence of any material pointing towards falsehood of the account books, cannot, by itself, be a ground to reject the account books under section 145(3). As clear from the ab....