2013 (2) TMI 438 - HC - Income Tax

Reduction of the gross profit rate AO applied the gross profit rate at 9.54% and assessee declared it at 8.5% - Held that - the previous history of the assessee was indicative that total turnover was sustained and that whenever there was increase in the sale there was a fall in the gross profit rate Accordingly application of 8.50% instead of 9.64% of the G.P. rate directed Against the revenue. Discrepancy in the cash book and disallowance of brokerage, travelling expense and HRA As decided in CIT vs. Banvari Lal Bansidhar when gross profit rate is applied that would take care of everything and there was no need for the AO to make scrutiny of the account incurred on the purchase made by the assessee these expenses should be allowed Against the revenue. Unaccounted cash AO found that payment of Rs.80,000/-, was not entered into the books of account and accordingly treated as unaccounted payment and addition was accordingly made - Held that - Once separate addition is made on account of higher gross profit, the undisclosed payment made by the assessee outside the books of account should be telescoped against the unaccounted income earned on account of higher gross profit rate No addition should be made - Against the revenue.

Summary

Issues:
1. Reduction of gross profit rate by the Tribunal
2. Deletion of addition on account of discrepancy in the cash book
3. Deletion of addition on account of unaccounted cash

Issue 1: Reduction of Gross Profit Rate by the Tribunal
The first issue revolves around the Tribunal reducing the gross profit rate from 9.54% to 8.50% instead of what was applied by the Assessing Officer. The Tribunal based its decision on discrepancies noted during a survey, including lesser cash and stock found compared to book results. It considered the history of the assessee and directed the application of 8.50% gross profit rate. The Tribunal's decision was supported by detailed reasoning and submissions from both sides, with no identified infirmities. As a result, the issue was deemed not to require further consideration.

Issue 2: Deletion of Addition on Account of Discrepancy in the Cash Book
The second issue concerns the deletion of an addition of Rs.3,74,687 due to a discrepancy in the cash book. The Tribunal noted a negative balance in the cash book, for which no substantive addition could be made. It rejected the book results and applied a gross profit rate, concluding that no further additions for expenditure disallowance were necessary. The Tribunal's decision was based on available material and detailed reasoning, citing relevant case law. Consequently, the issue was deemed not to warrant interference.

Issue 3: Deletion of Addition on Account of Unaccounted Cash
The third issue involves the deletion of an addition of Rs.80,000 on account of unaccounted cash. The Tribunal set aside the Assessing Officer's order, stating that once a separate addition was made for higher gross profit, no further addition was required for unaccounted cash. The Tribunal justified its decision based on available evidence, concluding that the Assessing Officer's addition of Rs.80,000 was unwarranted. As there were no identified infirmities in the Tribunal's decision, the issue was considered resolved.

In conclusion, the Tax Appeal was dismissed as it did not raise any substantial questions of law. The judgment highlighted the Tribunal's thorough analysis of each issue, supported by detailed reasoning and legal principles, ultimately leading to the rejection of the appeal.