TaxTMI 
TaxTMI 
2024 (12) TMI 504
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....information as called for. 3. The assessee is 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 ....
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....ificant and the same are applicable in case of the appellant 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 inc....
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.... it is concluded that the NP margin of 0.06% may be considered to have 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 A....
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....ot justified in directing the AO to compute claim of deduction u/s 80IB of IT Act on the profits and gains 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. 8,76,98,22....
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....d purchase register before the A.O. In view of the above vital facts the book results declared by the appellant deserve to be accepted. List of suppliers 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.....
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....ooks of account were wrongly rejected as the conditions laid down in sec.145 were non-existent and the A.O. has not made any specific point or ground for rejection of accounts. Ld. A.O. has made serious errors in alleging the figures of cash payments. Assessee gave a list (pages 69 to 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 sc....
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.... in a manner as might indicate the scales are weighted against the assessee. It is impossible to subscribe to the view that unless those authorities exercise the power in a manner most beneficial to the revenue and consequently most adverse to the assessee, they should be deemed to have exercised it in a proper and judicious manner. (10) In a recent landmark decision, 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....
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....s as well as the finished goods and duly audited by the certified accountant had been placed on record, but the Assessing Officer ignored those actual figures enclosed with the return. In any case, there is no statutory provision under the income-tax regime requiring the assessee to maintain the daily stock register. (xii) Hence, even if no such register was being maintained by the assessee, that, by itself, would not lead to the inference that it 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....