TaxTMI 
TaxTMI 
1997 (12) TMI 142
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.... Upholding the disallowance of Rs. 4,800 out of depreciation on car; (vii) Against the action of the CIT (Appeals) in sustaining the addition of Rs. 85,854 relating to the business income for the period 1-4-1990 to 17-5-1990 as against the declared income of Rs. 24,511 only; and (viii) Against the charging of interest under sections 234A and 234B. I.T.A.No. 752/Chandi./1995 is the appeal by the Revenue wherein the grounds taken are:- (i) Against the relief of Rs. 41,27,826 allowed by the CIT (Appeals) out of the total addition of Rs. 45,44,972; (ii) Deleting the addition of Rs. 4 lacs made on the basis of document No. 19; and (iii) Against the allowance of relief of Rs. 9,16,689 out of the estimated income of Rs. 10,02,543 made on account of income for the period 1-4-1990 to 17-5-1990. 2. The assessee firm derives income from manufacture of brass sheets as well as re-sale of scrap. In the assessment year under consideration, the assessee had declared the total sales of Rs. 5,50,37,667 out of which trading sales of brass scrap amounted to Rs. 5,46,70,307. Thus the sales of manufactured goods included in the total sales were only to the extent of Rs. 3,67,360. In....
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.... stock as per books amounting to 65112 kgs. was the derived figure on the basis of opening stock as on 1-4-1989 then adding the purchases upto the date of search and deducting the sales therefrom. The working is as under:- Stock position as per books of Account of M/s. Lakshmi Metal Works, Jagadhri, Financial year 1989-90 ---------------------------------------------------------------------------------------- Particulars Copper Scrap. Brass Scrap. Brass Sheet. Copper Ingots. Zinc ----------------------------------------------------------------------------------------- Opening stock 16829 19250 6219 - 7607.000 Add: Purchases 243559 301179 91588 2180.400 ....
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....sp; Wt.549 kgs. ------------------------------------------------------------------------------- Particulars Nickel Brass Ingots Brass Dross Brass Billets ------------------------------------------------------------------------------- Opening stock 323 - - - Add: Purchases - 5011 9906 4011 &nbs....
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....nbsp; 96820 - - - 4410(Not posted) -------- ------- --------- --------- --------- 111601 146920 (-)25293 (-)76793 13315 Less: Sales -  ....
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....; 38906 kgs. ---------- Difference ............ 26206 kgs. &n....
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....sp; ------ ------- -------- ------- 323 5011 9906 (-)36640 The working was arrived at by the assessee without taking into consideration any shortage during the various manufacturing operations. When the Assessing Officer asked the assessee to explain the difference between the stocks as per the books of account and the stock actually found at the time of search, the assessee stated that goods weighing 19034 kgs. were under transit sale account. It was explained that the assessee had sent the goods to M/s. Menu Manufacturing Company, Delhi vide Bill No. 3122 dated 6-11-1989 and a copy of the bill alongwith the copy of the sales-tax assessment order was furnished. The Assessing Officer,....
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.... account of alleged sales of stock outside the books of account, then only gross profit earned on such sales could be added and not the entire sales in view of the decision of the Third Member of the Tribunal in the case of ITO v. Gurubachan Singh J. Juneja [1995] 55 ITD 75 (Ahd.). 6. The ld. D.R. relied on the orders of the lower authorities and further submitted that at the time of search, the stock physically found was only 38906 kgs. as against the derived stock of 65112 kgs. and there was a difference of 26206 kgs. On this account. It was submitted that the so-called 'under transit sales account' relating to 19034 kgs. made to M/s. Menu Manufacturing Co., Delhi, was recorded on 6-11-1989, this sale must have been taken into account at the time of working out the availability of stock as per the books of account. It was submitted that the contention that this sale had not been taken into account for purposes of working out the availability of stock was not supported by in any manner as this fact was not pointed out at the time of search operation or even subsequently when the books of account were available and were not destroyed and the details of purchases and sales were p....
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....the partial disallowance out of telephone expenses, vehicle maintenance expenses and depreciation of vehicles. As such the disallowances are upheld for the reasons given by the ld. CIT (Appeals) in the impugned order and all the three grounds are adjudicated against the assessee. 9. Ground No. 7 in the assessee's appeal and ground No. (iii) in the Revenue's appeal relate to estimation of income from 1-4-1990 to 17-5-1990. The assessee had declared the income for this period on estimate at Rs. 24,511 whereas the same was estimated at Rs. 10,02,543 by the Assessing Officer from which relief of Rs. 9,16,689 was allowed by the ld. CIT (Appeals). In the allied concern of M/s. Shiv Metal and Engg. Works as well as M/s. Gupta Metal Industries, we have held that profits in an enterprise did not accrue or arise on day to day basis and these were to be computed/estimated only at the end of the accounting year. In the absence of any record available for the period under dispute, we directed in those cases that it would be fair and reasonable if the net profit was estimated at 1.5% of the sales for the period from 1-4-1990 to 17-5-1990. We direct so accordingly here also with the stipulatio....
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....ment as contained in the appraisal report of the ADI was confronted to the assessee. Accordingly the CIT (Appeals) deleted the addition holding that the same was made by the Assessing Officer on surmises and conjectures and without any material and evidence on record. 12. After hearing the parties to the dispute, we are in complete agreement with the conclusion and reasoning of the ld. CIT (Appeals) which we confirm and for that we make the reasoning and conclusion of the ld. CIT (Appeals) in paras 4 to 4.2 of the impugned order as our own. 13. In the result, the appeal of the assessee is partly allowed and that of the Revenue is dismissed. Per Bedi- After going through the proposed order of my learned brother, I have not been able to persuade myself to agree fully with the findings arrived at by him, as follows. 2. The facts and circumstances as well as the arguments of both the parties are well-recorded in the order above and I avoid repeating the same once more. 3. Taking ground Nos. 1 and 2 of the assessee's appeal and ground No. 1 of the revenue's appeal, stress of learned counsel for the assessee was for deletion of the entire addition as on similar facts in th....
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....asis of orders passed in the cases of Gupta Metal Industries and Shiv Metal & Engg. Works, reduced such addition, by giving a relief of Rs. 9,16,689 and since the plea in the case of Shiv. Metal & Engg. Works has also not been accepted by me for the detailed reasons given therein, in view of the facts and circumstances of this case, I am not inclined to accept the plea of the assessee. Therefore, order of ld. CIT (Appeals) is reversed on the issue and that of the Assessing Officer is restored. The assessee's ground fails and the revenue's ground of appeal succeeds. 7. I do concur with the findings arrived at by ld. Accountant Member in respect of ground No. 8 of the assessee's appeal. 8. Now, taking up ground No. 2 of the revenue's appeal, this issue stands discussed by the Assessing Officer in para 6 of the assessment order. According to the Assessing Officer, document No. 19 contained certain weighment entries, which were not found recorded in the books of account. Total of all these entries was Rs. 4 lakhs and holding that no evidence in this regard was furnished by the assessee, the addition was made. Before ld. CIT (Appeals), it was pleaded that the assessee was not conf....
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.... remaining unaccounted scrap as held by the Accountant Member or the ground of assessee be rejected in its entirety as held by the Judicial Member? 3. Whether, on the facts and in the circumstances of the case, the Accountant Member is justified in holding that the net profit should be estimated at 1.5% of the sales for the period from 1-4-1990 to 17-5-1990 or the order of the CIT (Appeals) on the point be reversed and that of the Assessing Officer restored? 4. Whether, on the facts and in the circumstances of the case, the order of the CIT (Appeals) deleting the addition of Rs. 4 lacs should be confirmed as held by the Accountant Member or the order of the CIT (Appeals) be set aside and restored to the file of the Assessing Officer for fresh adjudication? THIRD MEMBER ORDER 1. On a difference of opinion between the Members constituting the Division Bench, the following points of difference have been referred to me as a Third Member by the Hon'ble President under section 255(4) of the Income-tax Act, 1961:- 1. Whether, on the facts and circumstances of the case, G.P. rate of 1.9 per cent should be applied on the total sales as held by the Accountant Member or the ord....
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....orically stated by the Third Member that facts in two cases can never be identical but the reasoning and decision can be considered for application in any other case although assessee's own history is the best indicator. The ld. Accountant Member in his order followed the decision of the Tribunal in the case of Gupta Metal Industries as also his own order-in the case of Shiv Metal & Engg. Works to apply a GP rate of 1.9% as against 1.74% shown by the assessee and 2.5% applied by the CIT (Appeals) as against the rate of 10% taken by the Assessing Officer, the latter relying on the assessment order in the case of Sohan Lal Savinder Singh, Jagadhri. The CIT (Appeals) in applying a rate of 2.5% categorically ruled that the margin of profit in trading activity was bound to be lower and in that sense the assessee's case differed from the case of the other assessees engaged in manufacture as also its own history for earlier years when GP rate was higher being engaged in manufacturing as well. The reference obviously was to the case of M/s. Sohan Lal Savinder Singh, Jagadhri relied upon by the Assessing Officer. 3. The assessee also highlighted before the CIT (Appeals) the aspect of inc....
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....nd valid ground. If departure becomes the rule and not the exception, then there would be no rule of law leading to chaos and uncertainty. In the final analysis, I agree with the learned Accountant Member in respect of the first three points of difference referred to me. 6. As regards the fourth point of difference, the facts once again are not disputed but extracting these from the order of the ld. Third Member, the Assessing Officer on the basis of "document No. 19" found during the course of the search, made an addition of Rs. 4 lakhs. The said document contained certain weighment entries which were not recorded in the books of account. According to the Assessing Officer, the assessee had not furnished any evidence in support of the view canvassed. 7. On appeal before the CIT (Appeals), the assessee contended that it was not confronted with the relevant document and in the absence of such a document as also the books of account which had been destroyed in a fire while in the custody of the department, the assessee was not in a position to offer any explanation. It was prayed that the addition be deleted. These submissions found favour with the CIT (Appeals) who deleted the....
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....st this, the ld. Judicial Member restored the matter to the file of the Assessing Officer for a decision de novo "after due opportunity to the assessee and confronting the assessee with the circumstantial evidence so collected". The ld. counsel argued that the addition of Rs. 4 lakhs itself was improper, more so when the department itself accepted that the total of the weighment entries on the document pertained to the "group concerns". It was the further submission that the setting aside by the ld. Judicial Member was not justified since no material whatsoever was to be confronted to the assessee by the Assessing Officer there being none available on the record and nothing confronted in the earlier proceedings before the tax authorities and the Tribunal. According to him, a second innings could not be given to the Assessing Officer mere so when the ld. D.R. had categorically stated before the Tribunal that all available material had already been confronted to the assessee as had also been noted by the ld. Judicial Member in his dissenting order. 10. The ld. D.R., on the other hand, strongly supported the order of the ld. Judicial Member contending that no grievance had been cau....