2015 (4) TMI 435 - AT - Income Tax

G.P. addition on insulated scrap - CIT(A) restricted the addition - Held that - Finding of the ld.CIT(A) it is evident that the same is based on sound reasoning and material placed before him. As per the FIFO method the G. P. rate in respect of insulated scrap for A. Y. 2005-06 was 7.65% whereas for A. Y. 2006-07 it was 1.11% However by LOT to LOT method the G. P. rate for last year was 3.26% as against 1.66% for the present year. After considering all the facts and circumstances it would meet the ends of justice if G P. rate for the current year is taken @ 5%. The appellant has already shown a G. P. rate of 1.66%. Accordingly the addition @ 3.34% of the G. P. which works out to 12, 81, 410/- is sustained in respect of insulated scrap.The other major items of scrap which can be compared with the figures of previous year is cables and wires mtrs. There is a decline of about 2% in the present year. Considering all the facts and circumstances it would be judicious to make an addition on account of decline of G. P. rate by increasing the G. P. by 1%. After applying this rate to the sale of the present year the addition on this account comes to 1, 97, 134/-. The ld.Sr.DR could not controvert the finding by placing any contrary material on record. Moreover the Assessing Officer has not given any basis for estimating the profit on lump sum basis. Therefore we do not see any reason to interfere into the finding of the ld.CIT(A) same is hereby upheld. - Decided against revenue. Disallowance of commission expenses - CIT(A) allowed the claim - Held that -The A. O. had made an addition of 2, 08, 802/- as the appellant could not furnish complete name and address of the persons to whom above commission was paid. It has been submitted by the appellant that the TDS has been made u/s. 194H and copies of Form 60A was also filed by him before the A. O. He has given complete details mentioning the Address PAN and the amount of commission paid to 3 persons. The A. O. in his remand report has not given any comments on the information submitted by the appellant. Since the appellant has given necessary details for verification of commission expenses such as name and address of the person PAN confirmation of the person as well as Form 16A which was issued to the person to whom the commission was paid the A. O. was not justified in disallowing the commission. No reason to interfere into the finding of the ld.CIT(A) same is hereby upheld. - Decided against revenue.

Summary

Issues Involved:
1. Restriction of addition made on account of Gross Profit (GP).
2. Deletion of disallowance of commission expenses.
3. Admission of additional evidences in violation of Rule 46A.

Detailed Analysis:

1. Restriction of Addition Made on Account of Gross Profit (GP):
The Revenue's first ground of appeal contested the Ld. Commissioner of Income Tax (Appeals)-XIV, Ahmedabad (CIT(A))'s decision to restrict the addition made by the Assessing Officer (AO) from Rs. 50,00,000 to Rs. 14,78,543 on account of GP. The AO had initially rejected the assessee's book results under Section 145(3) of the Income Tax Act, 1961, due to a significant fall in GP from 10.78% in the preceding year to 3.62% in the year under consideration. The CIT(A) upheld the rejection of the books but found the AO's lump-sum addition of Rs. 50,00,000 unjustified. Instead, the CIT(A) conducted a detailed analysis of the appellant's submissions and found that the GP rate should be adjusted to 5%, leading to an addition of Rs. 14,78,543. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not provide a basis for the lump-sum addition and the CIT(A)'s findings were based on sound reasoning and material evidence.

2. Deletion of Disallowance of Commission Expenses:
The second ground of appeal by the Revenue was against the deletion of Rs. 2,08,802 disallowed by the AO on account of commission expenses. The AO disallowed the expenses due to the assessee's failure to furnish complete details of the recipients. However, the CIT(A) found that the assessee had provided necessary details, including names, addresses, PAN, and Form 16A for the commission payments. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue did not provide any contrary evidence to dispute the CIT(A)'s findings.

3. Admission of Additional Evidences in Violation of Rule 46A:
The third ground of appeal by the Revenue claimed that the CIT(A) admitted additional evidence in violation of Rule 46A. However, the Tribunal noted that the Revenue failed to specify what additional evidence was admitted in violation of Rule 46A. Consequently, the Tribunal saw no reason to interfere with the CIT(A)'s order on this ground.

General Grounds:
The fourth and fifth grounds raised by the Revenue were general in nature and did not require independent adjudication.

Assessee's Appeal:
The Assessee's appeal contested the CIT(A)'s confirmation of the Rs. 14,78,543 addition in respect of GP. The Tribunal noted that the appeal was barred by three days, but in the interest of justice, the delay was condoned. The Tribunal upheld the CIT(A)'s findings, consistent with their decision on the Revenue's appeal, and found no merit in the assessee's grounds.

Conclusion:
Both the Revenue's appeal and the Assessee's appeal were dismissed. The Tribunal upheld the CIT(A)'s decisions regarding the restriction of the GP addition, deletion of commission expense disallowance, and the handling of additional evidence. The order was pronounced in the Court on March 27, 2015, at Ahmedabad.