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Issues Involved:
1. Deletion of addition on account of suppression of production. Summary: 1. Deletion of Addition on Account of Suppression of Production: The Revenue appealed against the order of the CIT(A)-II, Surat, which deleted an addition of Rs. 27,72,458/- on account of suppression of production. The assessee, engaged in dyeing and printing of cloth on a job-work basis, disclosed a gross profit rate of 9.42% and net profit rate of 0.77%. The AO found the assessee's books unreliable due to the absence of a day-to-day production register and inconsistent consumption records of colors, chemicals, electricity, and gas. The AO rejected the books u/s 145(3) of the IT Act and estimated the gross profit at 15% of the turnover, leading to the addition of Rs. 27,72,458/- for suppressed production. The assessee contended before the CIT(A) that the AO's estimation was based on monthly variations in electricity and gas consumption without understanding the nature of the business. The CIT(A) agreed, noting that variations in consumption were due to the production process's complexity and stages. The CIT(A) found the AO's method of using May's consumption as a benchmark for other months inappropriate and concluded that the addition was based on guesswork without corroborative evidence. The CIT(A) deleted the addition, stating that the AO should have made inquiries with the assessee's clients to verify any suppressed production. Upon appeal, the Tribunal upheld the CIT(A)'s decision, agreeing that the AO's addition was speculative and unsupported by concrete evidence. The Tribunal noted that similar cases had been decided in favor of the assessee, confirming that the addition was not sustainable. Consequently, the Revenue's appeal was dismissed. Order pronounced in open Court on 26.10.2012.
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