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2014 (3) TMI 586 - HC - Income TaxRejection of books of accounts Violation of section 145 of the Act Low G.P. Ratio Held that - The GP addition was made by the AO after examining all the aspects very carefully, but the CIT(A) has deleted the addition on simple basis that since there is decrease in average sale price, fall in GP is explained thus, there is no reasonable basis in the order of the CIT(A) for deleting the addition. The issue is based on evidence on record and thus purely factual in nature - It is not the case where the books of accounts are rejected, merely on the basis of deviation in GP rate as recorded by the Assessing Officer and reiterated by the Tribunal - Not only there was a considerable deviation in the GP rate, the consumption of various raw materials also shown unusual pattern of deviation compared to the previous years - the assessee gave no explanation for extraordinary deviation in consumption of certain raw materials as such no question of law arises for consideration Decided against Assessee.
Issues:
1. Challenge to the judgment of the Income Tax Appellate Tribunal. 2. Addition made by the Assessing Officer on account of suppression of gross profit. 3. Sustaining the addition under section 36(i)(va) for late payment of employees' provident fund contribution. Issue 1: Challenge to the judgment of the Income Tax Appellate Tribunal The appellant challenged the judgment of the Income Tax Appellate Tribunal on two main questions. Question A dealt with the rejection of books of accounts by the Tribunal based on a low Gross Profit (GP) ratio, which the appellant argued violated the provisions of Section 145 of the Income Tax Act. Question B concerned the sustaining of an addition under section 36(i)(va) for late payment of employees' provident fund contribution. The CIT (Appeals) had deleted the addition, but the Tribunal reinstated the Assessing Officer's order. The Tribunal observed various reasons for upholding the addition, including a decline in GP, increase in consumption of raw materials, and a decrease in average sale price. Issue 2: Addition made by the Assessing Officer on account of suppression of gross profit The Tribunal reinstated the Assessing Officer's addition on account of suppression of gross profit, despite the CIT (Appeals) deleting the same. The Tribunal analyzed the GP rate, consumption of raw materials, and average sale price to justify the addition. The appellant contended that the Tribunal erred in reversing the CIT (Appeals) order without proper reasons and without considering relevant citations. However, the High Court found the issue to be factual, supported by evidence, and not solely based on GP rate deviation. The High Court upheld the Tribunal's decision based on the factual findings regarding the unusual consumption pattern of raw materials and the decline in average sale price. Issue 3: Sustaining the addition under section 36(i)(va) for late payment of employees' provident fund contribution The Tribunal also upheld the addition under section 36(i)(va) for late payment of employees' provident fund contribution. The appellant cited previous judgments to argue against the rejection of books of accounts based solely on GP rate deviation. However, the High Court found no legal question arising from the factual findings of the Tribunal. The High Court dismissed the Tax Appeal, affirming the Tribunal's decision on both issues. In conclusion, the High Court dismissed the Tax Appeal, upholding the Tribunal's decision on the addition made by the Assessing Officer and the sustaining of the addition under section 36(i)(va) for late payment of employees' provident fund contribution. The High Court emphasized the factual nature of the issues and the evidence supporting the Tribunal's findings, ultimately finding no legal basis to overturn the Tribunal's decision.
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