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TMI Blog2012 (8) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... objective of the proceedings under the Income-tax Act is to arrive at the correct income of the assessee. Therefore, matter restored to the file of the AO, for fresh examination Estimation of G.P. without rejection of books of accounts - alleged low G.P. - AY 05-06 - Held that:- It is not permissible to resort to estimation of the income of the assessee in terms of S.145(3), without rejecting the books of account maintained, a decision that follows the discovery of incompleteness, inaccuracy, etc. in the said books. Further, AO has not pointed out any defects in the books. Also, material seized at the time of search in the case of the assessee, has no bearing or relevance to the determination of the income of the assessee for the year under appeal. There is no scope for estimated additions in matters of search assessment s made u/s 153A of the Act. Addition made is deleted - Decided in favor of assessee. - ITA No.1435-1438/Hyd/2010 - - - Dated:- 28-6-2012 - SHRI D.KARUNAKARA RAO, AND SHRI SAKTIJIT DEY, JJ. Appellant by : Shri P.Murali Mohan Rao Respondent by : Shri V.Srinivas O R D E R Per D.Karunakara Rao, Accountant Member: These appeals by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etter/notice indicates the under-invoicing and suppression of sales by the assessee to the tune of Rs.2,77,99,210 covering the period spanning over 2000-01 to 2003-04. 4. On enquiry, assessee informed that the Central Excise Settlement Commission Chennai, was seized of the matter as it admitted the application filed before the Commission, wherein the assessee has offered additional turnover on account of Annexures D, E and E-I to the tune of Rs.1,02,43,939, the break-up of which is as follows- Annexure D Rs.69,72,468 Annexure E Rs.18,10,690 Annexure E-1 Rs.15,60,781 5. After hearing the assessee, the assessing officer rejected the contents appearing in the application filed before the Settlement Commission and proceeded to adopt the differential value realised as mentioned in the above four annexures, namely, D, D-1, E and E-1, which is worked out at Rs.2,77,99,210 on account of D and D-1, Rs.2,44,516 on account of E and Rs.19,26,506 on account of E-1. In fact, Annexures D and D-1 relate to under-invoicing and Annexures E and E1 relate to unaccounted sales, as made out by the assessing officer. The break-up of the quantum of under-invoicing tabulated by the assessing offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eflect suppression of quantum of sale. Therefore, differential value arrived at is the value which is suppressed by the assessee on the quantity sold by it. If such differential value is taken to the Profit and Loss Account, net profit of the assessee would obviously increase to the extent of Rs.14,15,020 for all the years put together, as admitted by the assessee himself before the Settlement Commission. The CIT(A) confirmed the offer of the differential liability to the tune of Rs.14,15,020 for all the three assessment years against the addition of Rs.1,04,74,478. 9. During the first appellate proceedings, the assessee furnished copy of the order of the Settlement Commission, which was not there during the proceedings before the assessing officer. Hence, after obtaining the remand report from the assessing officer on the said order of the Settlement Commission, the CIT(A) against the wishes of the assessing officer, admitted the said order as additional evidence and adjudicated the grounds of the assessee before him in the following manner. 03.4 The AO has made the addition of Rs.2,77,99,210/- being the amount of under invoicing based on the Annexure D and D-1. The Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re over and above what has been disclosed in the P L account has actually been incurred. Therefore, the differential value arrived by the AO is the value which is suppressed by the appellant on the quantity sold by it. If that differential is taken to the profit and loss account, the net profit of the appellant would obviously increase to that extent. I therefore agree with the AO that the entire differential amount needs to be taxed as it is. Accordingly, the addition made by the AO based on Annexure D for the A.Y. 2002-03, 03-04 and 04-05 is sustained. In the result, this effective ground of appeal is partly allowed. 10. Now, we shall take up the facts relating to the additions under the unaccounted sales vide entries in Annexures E and E-1 to the show cause notice. The amounts of additions based on Annexure E and E-1 are already tabulated- Assessment year Annexure D (Rs.) Annexure D-1 (Rs.) Total (Rs.) 2002-03 166586 --- 166586 2003-04 684044 974072 1658116 2004-05 1394532 952435 2346967 Total 4171669 Vide order of the Settlement Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r-invoicing; and (2) direction to the assessing officer for verification and revision on account of unaccounted sales relating to Annexure E and E-1. Regarding the first issue, learned counsel mentioned that the proceedings under Income-tax are entirely different vis-a-vis that of the proceedings under the Excise Laws. The concessions/admissions made by the assessee before the Settlement Commission relate to excise duty leviable under the relevant excise laws and they do not relate to the income or turnover. The assessing officer has erred in deeming it as income of the assessee, ignoring the fact that the offer before Settlement Commission refers to the increased excise duty attributable to the different classification of the same product under excise laws. Even the CIT(A) did not appreciate this aspect of the matter and merely followed the order of the Settlement Commission. Referring to the order of the Settlement Commission dated 25.1.2008, learned counsel for the assessee brought our attention to the table on page 2 of the said order and mentioned that the difference in Annexure D relates to the dispute in the calculation and otherwise, there is no difference on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise. The request of the learned counsel for the assessee for an opportunity to go back to the Revenue authorities to demonstrate how and why the assessee admitted in the application before the Settlement Commission the additional liability, and how it does not relate to either suppressed turnover or under-invoicing or sale price; but how they are related to rate differences only. which vary depending on the sizes of the slabs of various granites. In principle, we find there is no case of additional turnover warranting any addition to the turnover disclosed by the assessee. As such, the allegation of under-invoicing is also not fully supported by the orders of the Central Excise authorities. Prima facie, we are not agreeing with the CIT(A) s decision in relying on the order of the Settlement Commission, as merely on the basis of show-cause notice issued by the Commsisioner, of Central Excise, additions made by the assessing officer cannot be sustained. In our opinion, there is requirement of going into factual calculations arising out of difference of rates applicable to slabs of granite of various sizes. We also find merit in the contention of the assessee that the conclusions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quality granites. 20. Briefly stated facts of the case are that the assessee declared loss of Rs.25,38,447 in the return filed on the turnover of Rs.1,52,66,362 for the year under consideration, whereas the assessing officer noticed that the same is too low vis- -vis the G.P. rate of 25.51% for the assessment year 2004-05 and 26.27% for assessment year 2003-04. The assessing officer also compared the above loss result with that of its sister concern, namely Madhucon Granites Ltd., whose G.P. rates for assessee 2003-04 and 2004-05 were 44.11.% and 43.48% respectively. The assessee explained the reasons for the poor performance for the year under consideration, attributing the loss to the substandard quality of slabs excavated for the year under consideration. This explanation was rejected by the assessing officer, before resorting to estimation. He applied a rate of 25%, and made a G.P. addition of Rs.38,16,590. On appeal, the CIT(A), held the G.P. rate of 25% applied by the assessing officer as reasonable. 21. Aggrieved by the order oaf the CIT(A) on this aspect, assessee is in appeal before us. 22. Learned counsel took objection to the assessing officer s action of reso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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