2018 (5) TMI 1632 - AT - Income Tax

G.P. estimation - assessment u/s 153A - rejection of books of accounts - Held that - As decided in assessee s own case once GP rate is estimated, it is of the view that is not only the GP rate of the immediately preceding year but the average rate of at least 3 to 5 years must be looked into. If we go the average of the preceding 3 years of the five years must be looked into. If we go the average of the preceding 3 years of the five years, we find that the GP rate shown by the assessee is on the higher side. We, therefore, set aside the order of the CIT(A) and delete the addition. Undisclosed purchases from Rourkela Steel Plants - Held that - We find that the document on the basis of which the additions were made in the hands of the assessee do not belong to the assessee as the document itself states that they belong to Shree Gopal Engineering & Chemical Works (P) Ltd. and moreover, the assessee during appellate proceedings had sworn through affidavit that this document do not belong to it and had duly made submissions to learned CIT(A). In view of the above, ground decided in favour of the assessee.

Summary

Issues Involved:
1. Legal issues raised by the assessee.
2. Application of gross profit rate on enhanced sales.
3. Addition on account of alleged purchases from Rourkela Steel Plant.

Issue-wise Detailed Analysis:

1. Legal Issues Raised by the Assessee:
The assessee did not press grounds 1 to 4, which related to legal issues. Consequently, these grounds were dismissed as not pressed.

2. Application of Gross Profit Rate on Enhanced Sales:
The assessee challenged the application of a gross profit rate of 41.05% on enhanced sales of Rs. One crore and Rs. 50 lac for the respective assessment years. The assessee argued that similar additions were made in the assessment year 2000-01, which were decided in favor of the assessee by the Tribunal. The Tribunal had held that the gross profit rate applied by the Assessing Officer did not have any leg to stand on and directed the Assessing Officer to estimate the sales at Rs. 53,06,325/- and apply the gross profit rate of the preceding years, which was 26.48%. Following this precedent, the Tribunal allowed ground No. 5 in both appeals, directing the Assessing Officer to apply the gross profit rate of 26.48% instead of 41.05%.

3. Addition on Account of Alleged Purchases from Rourkela Steel Plant:
The assessee contested the additions of Rs. 8,47,730/- and Rs. 10,08,014/- made by the Assessing Officer based on documents LP-11 and LP-14 seized during the search. The assessee argued that these documents did not belong to it but to Shree Gopal Engineering & Chemical Works (P) Ltd., whose premises were also searched. The documents clearly indicated that the purchases were made by Shree Gopal Engineering & Chemical Works (P) Ltd. and not by the assessee. The assessee supported this claim with an affidavit and written submissions, including a comparative statement showing that the purchases were recorded in the books of Shree Gopal Engineering & Chemical Works (P) Ltd. The Tribunal found merit in the assessee's submissions, noting that the documents belonged to Shree Gopal Engineering & Chemical Works (P) Ltd. and that the assessee had duly made these submissions before the CIT(A). Consequently, the Tribunal decided ground No. 6 in favor of the assessee, deleting the additions made on account of alleged purchases from Rourkela Steel Plant.

Conclusion:
The appeals were partly allowed, with the Tribunal ruling in favor of the assessee on the application of gross profit rate and the additions related to purchases from Rourkela Steel Plant. The legal issues raised by the assessee were dismissed as not pressed. The judgment was pronounced in the open court on 21/05/2018.