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TMI Blog2015 (6) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... d stand to be passed on by it, and which also explains, or perhaps so, the reason for the unsubstantiated and unexplained trading loss being regularly booked by the assessee in its’ accounts. Finally, as regards the assessee’s plea for being allowed expenses some expenses would inevitably be incurred, we consider it proper that the same be allowed; reasonableness being the essence of any assessment, on an ad hoc, estimate basis, at ₹ 1 lac and ₹ 1.20 lacs for A.Y. 2007-08 and 2009-10 respectively, so as to cover all sundry expenses that may be incurred in the activity of raising bills. Before parting, we may also add that the assessee’s assessment u/s.23(5) of MVAT, 2002 dated 22.03.2013 for the financial year 2008-09 (copy of the order on record, at PB pgs. 3-7) shows the assessment of tax payable under the said Act at ₹ 15,98,735/-. The same, though allowable, being a tax, its deductibility would be subject to section 43B. - Decided partly in favour of assessee. - I.T.A. Nos. 1235 & 1232/Mum/2013 - - - Dated:- 16-2-2015 - SHRI SANJAY ARORA AND SHRI AMIT SHUKLA, JJ. For The Appellant : Shri Hasmukh Shah For The Respondent : Shri Premanand J O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TV-1 (at ₹ 50.42 lacs) and DCMIC CCHLORIDE (at ₹ 208.19 lacs); the assessee being a trader in chemicals and drug intermediates. The same was inexplicable, being in fact as high as 24% and 43.55% of the sale value of the said two products. No explanation for the same, i.e., in terms of the abnormal conditions, if any, attending the sales thereof, being in fact made in the regular course of business, throughout the year and, further, out of purchases made during the year, etc. were furnished. He, accordingly, disallowed 25% of the said loss, i.e., ₹ 64.65 lacs, assessing the income at ₹ 66.26 lacs, as against the returned income of ₹ 1,60,840/-. In appeal, the assessee furnished copies of the purchase and sale bills. To verify the same, as well as to allow the assessee another opportunity to state its case, a remand report was called for by the first appellate authority, i.e., from the assessing authority. In the remand proceedings, it was observed that the sales bills adduced in the appellate proceedings included that from two parties, i.e., Standard Drug and Pharma and Classic Pharma Industries, for sales at ₹ 130.83 lacs and ₹ 30.74 lac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss stood similarly claimed, income had been assessed, after rejecting the books of account, at 2% of the purchases, estimating the same as the commission or incentive earned by undertaking accommodation business. The ld. CIT(A) modified the assessment to one of the estimation of income, at 1% of the purchases and sales, i.e., as was done in the assessment of the assessee s sister concern, VDPL, albeit at 2% of purchases, and had in fact been adopted in the assessee s own case for A.Y. 2009- 10. Aggrieved, the assessee is in appeal for both the years. Arguments 4. Before us, the assessee s case was for a reasonable estimate of its income. The assessment in the case of VDPL, made at 2% of the purchases, had been confirmed by the first appellate authority at 1% thereof, placing a copy of the appellate order for A.Y. 2007-08 dated 18.01.2011 on record. In addition, it was submitted that the assessee be allowed its claim for expenditure, made at ₹ 8,01,370/- and ₹ 15,36,384/- for the two consecutive years respectively, in-as-much as the expenses had in any case to be incurred. The ld. DR, on the other hand, would rely on the impugned orders. Findings and Decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e book results for all other purposes. Disallowance of loss, thus, would not be appropriate. The same is also inconsistent with the inference of the assessee being not engaged in actual trading, but only in accommodation business, i.e., for its entire purchases and sales, and not only the sales made at a loss, so that its accounts and, consequently, book results, warrant rejection, as indeed was done for A.Y. 2009-10, estimating the income. Then, again, what is the basis of the assessment at 2% of the total purchases, i.e., the measure adopted for estimating the income for A.Y. 2007-08 in the case of VDPL, on which assessment, as modified by the first appellate authority, the assessee relies. As we understand, and which is also in agreement with our observation that the VAT credit on purchases would stand to be shared amongst the parties, the said credit, the applicable VAT rate on the relevant products being 4%, would stand to be divided equally between the buyer and the seller. What, then, is the basis for it being scaled down by half to 1%. We find no reason, much less cogent, or based on any materials, that could be said to inform the said decision by the first appellate auth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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