2014 (1) TMI 545 - AT - Income Tax

Payment of CST Held that - CST has been paid by 5 challans before the due date of filing return, which is allowable as per the provisions of section 43B - CIT (A) had granted relief after due verification of payments which have been made before due date Decided against Revenue. Addition on account of lower G.P. rate The gross profit rate for the year immediate preceding year was 9.118% in comparison to the current year gross profit rate at 4.063% - Held that - The sales were increased due to special order obtained by the assessee from the Department of Post, Government of India - The assessee has to make quotations with low profit margin in the tenders - The assessee has not given the bifurcation of the sales made to the Department of Post, Government of India and to other persons - Assessee s contention cannot be accepted in totality - The assessee itself has admitted that schedule of partners share capital account and computation of income was wrongly prepared - The assessee has to establish that the G.P. on sales to Department of Post and G.P. on sales to others are at variance The issue was restored for fresh decision.

Summary

Issues Involved:
1. Deletion of addition of Rs.8,50,000/- made by the Assessing Officer.
2. Deletion of addition of Rs.18,33,262/- made on account of low gross profit.

Analysis:

Issue 1: Deletion of addition of Rs.8,50,000/-:
The appeal filed by the revenue challenges the deletion of an addition of Rs.8,50,000/- by the CIT (A) for the Assessment Year 2008-09. The revenue contended that the challans did not mention the period they pertained to, and the assessee failed to provide documentary evidence, thus justifying the addition. However, the AR argued that evidence was supplied before the Assessing Officer, and the CIT (A) rightly deleted the addition after verifying the payments. The CIT (A) found that Rs. 8.50 lacs had been paid by 5 challans before the due date, meeting the requirements of section 43B. The AR's plea to sustain the CIT (A)'s order was accepted, and the relief was granted to the assessee after due verification of payments.

Issue 2: Deletion of addition of Rs.18,33,262/- on account of low gross profit:
The second issue involves the deletion of an addition of Rs.18,33,262/- made on account of low gross profit. The revenue argued that the CIT (A) deleted the addition without a valid basis, as the gross profit rate was significantly low, and the assessee failed to provide a reasonable explanation. The AR, however, supported the CIT (A)'s decision, stating that the Assessing Officer had made the addition from other expenses as well. The Tribunal noted that the Assessing Officer estimated the gross profit at 9.12%, higher than the declared G.P. of 4.063%, citing reasons such as increased sales due to a special order from the Department of Post. However, the assessee failed to provide a clear bifurcation of sales or supporting evidence, leading to the conclusion that the explanation for the low G.P. rate was not fully convincing. As a result, the issue was remanded back to the Assessing Officer for a fresh decision.

In conclusion, the appeal was partly allowed for statistical purposes, with the Tribunal upholding the deletion of the addition of Rs.8,50,000/- but remanding the issue of the addition of Rs.18,33,262/- back to the Assessing Officer for further examination and decision.