TaxTMI 
TaxTMI 
2015 (12) TMI 1912
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....2.5% i.e. Rs. 53,03,685/- by erroneously holding that valuation of closing stock has not been explained even when the valuation of closing stock was part of trading account furnished and more-so the finding of Worthy CIT(A) is erroneous since no explanation regarding the valuation of trading stock was ever called for during the appellate proceedings. In fact, the appellant did not earn income during the year from trading turnover. By holding that the appellant had earned estimated income of Rs. 53,03,685/- from trading turnover as against declared by the appellant at NIL the Worthy CIT(A) has erred in confirming the restriction of deduction us 80IC by Rs. 15,91,105/- i.e. 30% of Rs. 53,03,685/-, since the year in question was the 6th year o....
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....to arrive at the profits earned from trading activity. The assessee further pleaded that in doing so the AO had ignored the sale and purchase bills of the trading activity as per which the G.P. from trading operation worked out to Rs. 26,45,247/-. Further the assessee submitted that, if expenses financial cost, R&D expenses are ignored, administrative & selling expenses are in excess of 4.75% of its turnover and if indirect expenses are taken at 1.25% the resultant would be loss from trading operation. The assessee therefore submitted that it had not earned any profits from trading operations and the entire profits related to manufacturing activity which was eligible for deduction u/s 80IC. 5. The Ld. CIT(A) after considering the submissio....
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....t the assessee had not claimed any deduction u/s 80IC on account of trading operation Ld. AR further pleaded that the Ld. CIT(A) though had accepted the contention of the assessee that its G.P. from trading operation as per sale, purchase bills is only Rs. 26,45,247/- he had questioned the valuation of closing stock without even confronting the same to the assessee. This the Ld. AR argued was against the principles of natural justice and the disallowance ought to be deleted on this ground alone. Ld. AR further stated that the Ld. CIT(A) had adopted an adhoc net profit rate of 2.5% on turnover for calculating the profit from trading operation, which was without any basis at all. Thus, the Ld. AR pleaded that the disallowance of deduction u/s....
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.... rate. No comparable instances have been brought before us, nor has any effort been made to work out the trading profit from the details provided by the assessee. We therefore hold that there is no basis, leave aside reasonable basis, to apply net profit rate of 2.5% on the trading income of the assessee and the same is therefore rejected. On the other hand we find that the assessee had submitted a detail showing the working of the gross profit from trading operations from the purchase and sale bills for the year at Rs.26,45,247/-. Ld. CIT(A) we find has not doubted the figures of sales and purchase but has stated that the closing stock valuation at Rs. 1,31,78,711/- has not been explained by the assessee and therefore the G.P. of Rs. 26,45....