TaxTMI 
TaxTMI 
2023 (11) TMI 1456
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....ilver bullions to the tune of Rs. 51,20,79,310/- and Rs. 2,96,44,454/- respectively. 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law by deleting the addition made on account of estimate of gross profit on sale of gold and silver bars due to rejection of books of accounts, without giving any contrary finding against those of AO. 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law by deleting the addition made on account of estimate of gross profit on sale of gold and silver bars due to rejection of books of accounts, by ignoring the findings of AO in the assessment order of assessment year 2011-12, which formed the basis of rejection of books of account." I.T.A. No. 439/Ind/2018 - A.Y. 2013-14: 1. That on the facts and circumstances of the case, the order of the Ld. CIT(A) is bad and erroneous in law as well on facts. 2. Whether in the facts and circumstances of the case, the Ld. CIT(A) was justified in admitting the appeal which was filed well beyond prescribed time limits without any verifiable sufficient cause for such substantial delay. 3.....
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....ing delivered at various centres at the request of customers but sale-consideration was shown as collected in cash primarily at Indore and the assessee was not maintaining proper sales-bills, customer-details and quantity-details. Having rejected books, the AO estimated gross-profit of assessee on 1 kg. of gold in the range of Rs. 4,000/- to Rs. 6,000/- per 100 grams and on sale of silver in the range of Rs. 1,200/- to Rs. 2,500/- per kg. Accordingly, the AO made additions on account of estimated gross-profit in AY 2009-10 to 2011-12. 3. Against order of AO, the assessee went in first-appeal. The CIT(A), though upheld the rejection of books, but found the AO's method of estimation of gross-profit as faulty. He made some modification, namely he grouped together the gold and silver segments and computed aggregate- turnover; then enhanced aggregate-turnover by 17.5% and then applied G.P. Rate of 1.25% for all years. By such modification, the CIT(A) granted part- relief to assessee and at the same upheld part-addition too. 4. Against order of CIT(A), the assessee as well as revenue, both sides, went in second appeal before ITAT in IT(SS)A Nos. 241 to 243/Ind/2015 and IT(SS)A ....
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....T(A) estimated the GP at 1.25% and also enhanced the total turnover by 17.5% for these years and made the addition. 13. We further find that the CIT(Appeals) vide para-14 of the order concluded that method of estimation of profit adopted by AO was defective and faulty hence such estimation of income was rejected for all the years in relation to gross profit on sales of gold bullion. Similar defects were also there in estimation of profit by AO on sale of silver bars hence that estimation was also rejected. However, the learned CIT(A) grouped the sales of gold bullion and silver bullion together at Rs. 10,35,53,58,633/- (i.e. gold bullion Rs. 1030,03,690/- and silver bullion Rs. 5,50,01,943/-) for A.Y. 2011-12. Similarly, the learned CIT(A) grouped the sales of gold bullion and silver bullion together at Rs. 585,95,67,563/- (i.e. gold bullion Rs.584,67,73,769/- and silver bullion Rs. 1,27,93,794/-) for A.Y. 2010-11 and by making enhancement of 17.5% on aggregate sales, the learned CIT(A) applied gross profit rate of 1.25%. 14. We further find that the additions in silver bullion account were made by the Assessing Officer at Rs. 9,65,123/- and Rs.40,69,563/- in A.Y.....
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....o enhance the turnover by 5% for the assessment year 2010-11. We direct accordingly. Since we are accepting the GP rate declared for the assessment year 2009-10 in the absence of any incriminating documents for the relevant period and better book results in comparison to succeeding years and no defect in books of accounts was found by the authorities below for assessment year 2009-10, therefore, we direct to accept the book results for the assessment year 2009-10. The gold prices were also increased during the relevant period. The average gold price for the period relevant to the assessment year 2007-08 was Rs.8.36 lacs per kg. which increased to Rs. 16.32 lacs per kg for the period relevant to the assessment year 2010-11 and Rs. 20,72,000/- for the period relevant to assessment year 2011-12. We also observe that whenever there is tremendous increase in the price of gold, the margin of profit shrinks. Gold market is well informed marked and guided by international price. There was VAT of 1% on the recorded trading of gold. Thus, the gross profit estimated on unrecorded sales cannot be applied to the recorded sales as the margin of tax also remains with the seller of unaccounted sal....
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....kash Dhanwani (2018) 33 ITJ 854 (MP), copy of order is placed before us. Referring to Para No. 6 and 7 of order, Ld. AR submitted that the Hon'ble High Court has approved the order of ITAT. These paras are re-produced below for an immediate reference: "6. The addition on account of estimation of gross profit of Gold and Silver Bar, the Commissioner of Income-tax (Appeal) has confirmed addition and the assessee was ultimately granted a relief of Rs. 4,98,05,923/-. The Commissioner of Income-tax (Appeal) has partly affirmed the order passed by the Assessing Officer. Against the order passed by Commissioner of Income- tax (Appeal), the assessee as well as the Income-tax Department preferred appeals before the Income-tax Appellate Tribunal (ITAT) and the ITAT has allowed the appeal of the assessee. 7. The present appeal has been filed under section 260A of the Income-tax Act, 1961 and the Income-tax Department has raised certain substantial questions of law. This Court has carefully gone through the order passed by the ITAT and the ITAT has given detailed fact finding in favour the assessee after scrutinizing the facts, the matter has been decided by the ITAT judi....
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.... request of customers but sales consideration is collected in cash only at primarily in Indore or few other places and no records of customers of cash sales, as discussed above are as similar to findings in Assessment-Order of AY 2011- 12, on the basis of which books are rejected then, hence in view of above discussion and specific discrepancies the books of accounts of assessee for reference assessment year are rejected and the gross profit is determined as under: "4. 4 Gold Bullion : During A.Y. 2011-12, in the assessment order passed u/s 153A rws 143(3), was determined as 6000 rupees on sale of per 100 gram kg. gold bar. Assessee had submitted that he has filed appeal before CIT(A) on this issue. In order to maintain the consistency with earlier, I also take the rate at Rs. 6000 on per 100 gram kg. gold bar, as assessee's modus operandi remain the same as in A.Y. 2011-12. During the year the assessee has shown purchases of Gold bar weighing 89,00,746.455 gms. for Rs. 2336,67,53,505/-. The sale of Gold bar weighing 89,00,746.455 gms. has been shown at Rs. 2338,95,97,376/-. The assessee has shown gross profit of Rs. 2,19,59,682/-. Thus, Gross profit comes out....
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....h seized during the search. The AO rejected the books of accounts for assessment years 2009-10, 2010-11 and 2011-12 and made addition on account of G.P. 4.2 The appellant has placed reliance on the orders of the Hon'ble ITAT Indore in the appellant's own case for assessment years 2009-10 to 2011-12 and M/s. MCS Trading Co. P. Ltd. for assessment years 2010-11 and 2011-12. 4.3 Hon'ble ITAT, Indore, in its order in IT(SS)A Nos. 241 to 243/Ind/2015 and IT(SS)A Nos.254 to 256/Ind/2015 dt. 17.5.2016 in the appellant's case has held in paragraph 15 as under :- "15. We also find that the assessee is dealing in precious metal like gold and silver and the rates are verifiable and available in open to every customer from MCX gold reports or Sarafa Publications. Thus, the customers who purchase goods from the assessee were well aware about the prevailing market price of these metals at the relevant time. Most of the purchases are from reputed dealers. Very few documents pertaining to the assessment year 2011-12 were seized which suggest that the assessee indulged in trading which was not recorded in the books of accounts. For recorded purchases, the ....
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....% on the recorded sales and Shri Doshi was also engaged in similar business. In the case of Baldev Krishna the GP was estimated at Rs. 400/- per 120 gms which comes to around 0.2% of the sales recorded. Similarly in the case of Vonamala Jagdishwaraiah: (2015) 44 CCH 005 GP at 0.1% has been accepted by Hyderabad Bench of ITAT and in the case of Mahendra Kumar Agrawal (2015) Tax Publication (DT) 2124 the Jaipur Bench of the Tribunal accepted the GP of 0.1%. Further, we are of the view that on unrecorded sales estimated, the profit has to be worked out at the rate of 1.25%. Considering all these aspects we sustain the gross profit rate of 1.25% on the enhanced turnover of gold bullion for the assessment years 2010-11 and 2011-12 and on the recorded turnover disclosed in the books of accounts, we direct to apply gross profit rate of 0.25%." 4.3.1 The Hon'ble ITAT has accepted the gross profit rate declared for assessment year 2009-10 in the absence of any incriminating document for the relevant period, better book results in comparison to succeeding years and the fact that no defect in the books of accounts was found by the AO and CIT(A). The Hon'ble ITAT did not accep....
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.... of the gross profit rate of the period under consideration is as under: Year Turnover Gross profit G.P.% 2009-10 5859567565 8108058 0.14 2010-11 10355358631 10599021 0.10 2011-12 24031431074 22099940 0.09 [CIT(A) has wrongly mentioned .90] 2012-13 33030543784 35015986 0.11 5.1 It is seen that the turnover of the appellant is Rs. 3303,05,43,784/- for assessment year 2012-13 and Rs. 2403,14,31,074/- in A.Y. 2011-12 which is an increase of 37.4%. The G.P. has increased from 0.09% in A.Y. 2011-12 to 0.11% in A.Y. 2012-13. 5.2 The appellant had produced the stock register for verification during the assessment proceedings and the AO has not pointed out any instance of sales been made at a rate below the prevailing market rate. The Hon'ble ITAT has clearly held in the case of M/s. MCS Trading Co. P. Ltd. that if the sale is not found to have been made at the rate below than the market rate, any allegation regarding manipulation in the cash memos cannot be accepted. Further, the Hon'ble ITAT in the case of M/s. MCS Trading Co. P. Ltd. has deleted the estimation of gross profit for assessment year 2010-1....
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.... that if the sales is not found to have been made at the rate below than the market rate, any allegation regarding manipulation in the cash memos cannot be accepted. Further, the Hon'ble ITAT in the case of M/s MCS Trading Co. P Ltd. has deleted the estimation of G.P. for AY 2010-11 in the absence of any incriminating material. In the appellant's case, the Hon'ble ITAT has upheld the addition on account of G.P. rate for AY 2010-11 only due to the fact that there was sharp fall in the G.P. compared to the preceding year. In the period under consideration despite decrease in turnover, the G.P. has increased compared to the preceding year. 4.2.10 In view of above facts and circumstances of the case and respectfully following the decision of Hon'ble ITAT, Indore in appellant's own case and in the case of M/s MCS Trading Co. P. Ltd. I hold that there is no justification for rejecting the books of accounts of the appellant for AY 2013-14, in the absence of any incriminating evidence and merely on the observation that huge amount of cash sales are unverifiable. Therefore, the appeal on ground no. 2 is therefore allowed." AY 2014-15: "4.2.7 Th....
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....terial having been founded by department, itself supports the assessee's very stand and not the revenue's case. He submitted that in the years under consideration, namely AY 2012-13 to 2014-15, there is no 'material' whatsoever available with the AO and the AO was simply hastened to apply his predecessor's order. He submitted that the principle of re judicata does not apply to income-tax proceedings and the authorities have to examine each year independently. He submitted that during assessment-proceeding when the AO show-caused assessee, the assessee produced books of account with supporting evidences and categorically submitted that he is regularly maintaining books of accounts of business; complete quantitative details of opening stock, purchase, sales and closing stock of each item are maintained; audit u/s 44AB of the Income Tax Act has been conducted and no fault has been reported by auditors. He submitted that the AO has also not found any serious defect or deficiency in books of account so maintained. He submitted that the AO has noted certain illustrations to tally 'day-end closing cash balance of assessee' by using his self-devised mathematical....
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....epartment on the very same date and the underlying facts are identical. Ld. AR submitted that there can hardly be any objection by revenue against the order of CIT(A) which is based on the conclusions derived by higher forums. Therefore, the order passed by CIT(A) is a proper and valid order and must be upheld. 12. Having argued thus, Ld. AR went further to explain a later development which has also taken place after passing of impugned order by CIT(A) and which is a direct authority to support assessee's very stand that the rejection of books by AO for AY 2012-13 (or AY 2013-14 and 2014-15) and making addition in those years, is not justified. Ld. AR submitted that the case of M/s MCS Trading Co. Private Ltd. for subsequent AY 2012-13 has already been decided by ITAT, Indore Bench in ITA No. 353/Ind/2017, order dated 09.04.2019, wherein the ITAT has held, on identical set of facts as of assessee, that the rejection of books and making additions in AY 2012-13 is not justified. Ld. AR pointed out that in the said decision, the ITAT has also referred, at multiple occasions, the ITAT's order of earlier years in present assessee's (Om Prakash Dhanwani's) case. The re....
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....ry item of purchases as well as sales are maintained. Audit under the provisions of Companies Act 1956 u/s 44AB of the Income Tax Act have been conducted and no fault have been found by the Auditors in the maintenance of such books of accounts. Furthermore, the Ld. A.O. has also not found any significant defect or deficiency in such books of accounts and he has merely adopted the reasoning for Assessment Year 2009-10 and 2010-11 taken by his predecessor for finalizing the assessment, which is uncalled for. He also contended that the Ld. A.O has not raised any doubt about the correctness of the sales, purchases and day to day quantitative as well as valuation of opening and closing stock. Merely applying Gross Profit rates adopted by the predecessor is most arbitratory and the finding of Ld. A.O is rightly rejected by Ld. CIT(A). 20. We have heard rival contentions and perused the records placed before us. Revenue has challenged the finding of Ld. CIT(A) holding that the Ld. A.O. erred in rejecting the books of accounts of the assessee u/s 145(3) of the Act and has also challenged the finding of Ld. CIT(A) deleting the addition made by Ld. A.O on account of estimation of Gr....
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....rounds for both the years on this issue are dismissed". 22. It is also pertinent to note that Ld. CIT(A) followed the decision of the Tribunal for Assessment Year 2010-11 and deleted the additions made by the Ld. A.O for the year under appeal and also held that the action of the Ld. A.O rejecting the books of accounts cannot be accepted observing as follows; "5.1 Search and seizure action u/s 132 was conducted at the business premises of the appellant on 25.11.2010. In respect of A.Y. 2011-12 excess stock amounting to Rs. 1,73,81,169/- was found during the search and the appellant surrendered Rs. 5 Crores as additional income. The Assessing Officer rejected the books of accounts for A. Ys 2010-11 and 2011-12 and made addition on account of G.P. 5.2 The appellant has placed reliance on the orders of the Hon'ble ITAT, Indore in the appellant's own case for A. Ys 2010-11 and 2011- 12 and in the case of Shri Omprakash Dhanwani for A. Ys 2009-10 to 2011-12. 5.3 Hon'ble ITAT, Indore in its order in IT(SS)A Nos 241 to 243/Ind/2015 and IT(SS)A Nos 254 to 256/Ind/2015 dated 17.05.2016 in the case of Shri Omprakash Dhanwani held in paragraph 15....
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....rded trading of gold. Thus, the gross profit estimated on unrecorded sales cannot be applied to the recorded sales as the margin of tax also are increased by VAT which reduces the margin of profit by the similar amount. The cumulative effect of increase in turnover and increase in gold price must have reduced the gross profit for the assessment years 2010-11 and 2011-12. We also find that the Additional Commissioner of the same Range in the case of Shri Nitesh Kumar Doshi for the A. Y. 2010-11 has accepted the G.P rate at 0.14% on the recorded sales and Shri Doshi was also engaged in similar business. In the case of Baldev Krishna the GP was estimated at Rs.400/- per 120 gms which comes to around 0.2% of the sales recorded. Similarly in the case of Vonamala Jagdishwaraiah; (2015) 44 CCH 005 GP at 0.1% has been accepted by Hyderabad Bench of ITAT and in the case of Mahandra Kumar Agrawal (2015) Tax Publication (DT) 2124 the Jaipur Bench of the Tribunal accepted the GP of 0.1%. Further, we are of the view that on unrecorded sales estimated, the profit has to be worked out at the rate of 1.25%. Considering all these aspects we sustain the gross profit rate of 1.25% on the enhanced tur....
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....ssessing Officer and the Revenue Authorities have not brought on record any single instance of any sales having been made at a rate lower than the then prevailing market rate. If the sale is not found to have been made at the rate below than the market rate, any allegation regarding manipulation in the cash memos without any basis has no legs to stand. The Hon'ble ITAT deleted the action of the CIT(A) in enhancing the sales on ad hoc basis by 20% of the sales shown in the audited accounts for A. Y.s 2010-11 and 2011-12. 5.6 The Assessing Officer has primarily rejected the books of accounts holding that the huge cash sales made are unverifiable in the absence of completed address on the sale bills. The Hon'ble ITAT has clearly held in the appellant's case that if the sale is not found to have been made at the rate below than the market rate, any allegation regarding manipulation in the cash memos cannot be accepted. The Hon'ble ITAT has also not upheld the rejection of books of accounts for A. Y. 2010-11 in the absence of any incriminating material. 5.7 In view of the facts and circumstances of the case and respectfully following the decision of Hon....
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....contentions of both sides and perused the material held on record including the orders of lower-authorities. On a careful consideration, we firstly find that the present appeals before us relate to AY 2012-13 to 2014-15 for which the assessee is regularly maintaining books of accounts of business which have been subjected to audit u/s 44AB of the Income Tax Act and no fault has been noted by auditors. Even the AO has not reported any defect or deficiency in books of account so maintained. Prima facie, there is also a merit in submission of assessee/Ld. AR that the 'mathematical formulae' adopted by AO to tally daily cash-balance, as discussed in foregoing paragraph of this order, is not a valid calculation. We find that the AO has rejected books of assessee and merely applied Gross Profit rates of Rs. 6,000/- per 100 grams kg. gold bar and Rs. 2,500/- per kg. silver bar, to maintain consistency with his predecessor view in earlier year's assessment-orders even when there is no adverse evidence or material qua current year to reject current year's books. We find merit in Ld. AR's submission that re judicata does not apply to income-tax proceedings. Therefore, ....