9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (3) TMI 1132 - AT - Income TaxRejection of books of accounts - profit estimation - unverifiable purchases - Held that - Considering the aspects that there was substantial growth of 13.88% in the turnover in comparison to last year it cannot be said that the g.p. rate shown at 12.73% during the year on declared sales of 14, 26, 90, 358/- against g.p. rate of 13.97% on the turnover of 2.92 crores shown during the last year was unreasonable to justify the trading addition made by the A.O. at 7, 91, 855/- by applying g.p. rate of 13.28% and application of g.p. rate of 13% by the Ld. CIT(A) sustaining the trading addition of 3, 99, 533/- in question. A.O. had applied g.p. rate of 13.28% on the declared sales on the basis of weighted average which has been corrected by the CIT(A) with this observation that the correct weighted average rate of g.p. actually comes to 13.01% instead of 13.28%. Thus in over all result of the assessee in comparison to the last year and that the assessee had furnished all the necessary information/details about the transaction and the parties supported with the documents as could have been expected from a prudent purchaser to establish the genuineness of the claimed transaction we are of the view that the lump sum addition of 1, 00, 000/- will meet the ends of justice to plus the possible leakage if any as the claimed purchases remained unverified but sales declared has not been doubted.
Issues Involved
1. Validity of the assessment order passed under section 143(3)/153A. 2. Rejection of books of accounts under section 145(3) of the Income Tax Act, 1961. 3. Application of gross profit (GP) rate and resultant trading additions. 4. Addition on account of alleged undisclosed profit of Silver Star Unit. 5. Disallowance under section 36(1)(va) regarding employee's contribution towards PF and ESI. Detailed Analysis 1. Validity of the Assessment Order under Section 143(3)/153A The assessee argued that the search and seizure operation did not uncover any new information that was not already known to the department, making the action under section 153A unjustified. The assessee also contended that the principles of natural justice were violated as the statements of key individuals were used without allowing cross-examination. The Tribunal noted that the issues of bogus purchases were already considered in earlier assessments and upheld by the ITAT, and thus, the same issues could not be reconsidered under section 153A without new evidence. Consequently, the Tribunal found the assessment order under section 143(3)/153A to be void. 2. Rejection of Books of Accounts under Section 145(3) The Assessing Officer (AO) rejected the books of accounts citing various discrepancies, including bogus purchases and sales, unaccounted transactions, and discrepancies in stock records. The Tribunal, however, noted that the assessee maintained complete books of accounts audited under section 44AB, and no serious defects were pointed out by the AO. The Tribunal found that the AO's reliance on the statements of individuals without allowing cross-examination violated the principles of natural justice. Therefore, the Tribunal did not uphold the rejection of books of accounts under section 145(3). 3. Application of Gross Profit Rate and Trading Additions The AO applied a GP rate of 17% based on the results of a group concern, M/s Gupta Emerald Mines Pvt Ltd. The assessee contended that the GP rate applied was arbitrary and not comparable to its business. The Tribunal noted that the GP rate accepted in earlier assessments was significantly lower and that the AO did not bring any new material to justify the higher GP rate. The Tribunal found that the application of a 17% GP rate was unjustified and reduced the trading addition accordingly. The Tribunal also noted that the assessee's GP rates in earlier years were accepted by the ITAT, and thus, no further addition was warranted. 4. Addition on Account of Alleged Undisclosed Profit of Silver Star Unit The AO made additions based on a pen drive allegedly maintained by an employee, which contained two sets of accounts. The assessee argued that the transactions in the pen drive were not provided for verification and that the statements of the employees were recorded under duress. The Tribunal found that the AO did not provide sufficient details to justify the addition and noted that the actual profit of the Silver Star Unit was already declared in the regular return. Therefore, the Tribunal did not uphold the addition on account of undisclosed profit. 5. Disallowance under Section 36(1)(va) Regarding Employee's Contribution towards PF and ESI The AO disallowed the employee's contribution towards PF and ESI, citing delayed payment. The assessee argued that the payments were made within the financial year and before the due date of filing the return. The Tribunal referred to the Supreme Court's decision in Vinay Cement and other cases, which allow such payments if made before the due date of filing the return. Consequently, the Tribunal deleted the disallowance. Conclusion - The Tribunal found the assessment order under section 143(3)/153A to be void. - The rejection of books of accounts under section 145(3) was not upheld. - The application of a 17% GP rate was found to be unjustified, and the trading addition was reduced. - The addition on account of alleged undisclosed profit of Silver Star Unit was not upheld. - The disallowance under section 36(1)(va) regarding employee's contribution towards PF and ESI was deleted. Final Orders - All the appeals filed by the assessee were allowed. - All the appeals filed by the Revenue were dismissed.
|
