2022 (6) TMI 448 - AT - Income Tax

GP estimation - Estimating the gross profit at 38% of the turnover - assessee is carrying out its manufacturing activity from the SEZ and eligible for exemption under section 10A - HELD THAT - On perusal of the grounds of appeal raised by the assessee, we note that the assessee was aggrieved for estimating the gross profit at the rate of 38% of the turnover. But there was no contention raised by the learned counsel for the assessee in the written submission filed him qua the grievance raised in the grounds of appeal. In the written submission the assessee has sought the relief/ exemption under section 10A of the Act with respect to the profit arising to it from the trading of spare parts of the DC motors. AR in support of assessee s claim has also filed the order of the ITAT in the own case of the assessee which is placed on record. However, we note that the learned CIT-A has already allowed the relief to the assessee with respect to the profit arising to it from the trading activities of spare parts by allowing the exemption under section 10A of the Act. Accordingly, we hold that there was no grievance to the assessee with respect to the trading activities as contended in the written submissions. Thus we note that there is no grievance to the assessee with respect to the gross profit estimated by the AO at the rate of 38% of the turnover. Accordingly, the appeal filed by the assessee is not maintainable. Thus we dismiss the same as infructuous

Summary

Issues:
Estimation of Gross Profit at 38% leading to additions in assessment under Section 143(3) of the Income Tax Act, 1961 for Assessment Year 2011-12.

Analysis:
The appeal was filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-3, Rajkot, challenging the estimation of Gross Profit (GP) at 38% and resulting additions amounting to Rs.16,61,725. The assessee contended that the GP estimation was high and needed deletion or substantial reduction. The main issue raised was the high estimation of GP by the authorities.

The assessee, a partnership firm engaged in manufacturing DC motors and trading spare parts, operated from the SEZ and claimed exemption under section 10A of the Act. The Assessing Officer (AO) observed a decline in GP ratio, unclaimed airfare charges, unexplained prior period expenses, and discrepancies in salary records. Consequently, the AO rejected the books of accounts under section 145(3) and estimated GP at 38% based on the average of the last 2 years and the current year, resulting in additions to the declared GP.

The CIT-A dismissed the appeal, upholding the GP estimation. The Appellate Tribunal noted the assessee's challenge to the GP estimation but found no grievance in the written submissions regarding the same. The Tribunal also highlighted the assessee's acceptance of the GP estimation at 38% subject to proportionate exemption under section 10A, indicating no objection to the GP estimation.

Considering the lack of objection to the GP estimation in the written submissions and the acceptance of the estimation with conditions before the AO, the Tribunal deemed the appeal as infructuous and dismissed it. The Tribunal held that since there was no grievance raised by the assessee specifically regarding the GP estimation, the appeal was not maintainable, leading to its dismissal.

In conclusion, the Tribunal dismissed the appeal filed by the assessee, emphasizing the absence of a specific challenge to the GP estimation despite other contentions raised, leading to the rejection of the appeal and upholding the additions made based on the estimated GP.