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TMI Blog2012 (1) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of ₹ 2,88,74,790/-. During the assessment proceedings, the AO noticed that assessee ;has shown GP of ₹ 3,17,94,415/- on total sales of ₹ 36,04,94,486/-. The rate comes to 8.81% as compared to 10.13% shown in earlier year. The AO observed that assessee has not maintained quantitative details of goods and also not able tp submit inventory of opening and closing stock. The AO further observed that assessee was not able to produce the wages register. Vouchers were verified for payment of job work charges and out of this, ₹ 11,85,602/- were found to have been paid on self made vouchers. Total expenses on account of job work charges was claimed at ₹ 1,20,41,420/-. By observing these facts, the AO found that provisions of section 145(3) are applicable on the facts of the present case. The assessee was required to give reasons for increase in raw material price for last three years and increase in sale price per unit. The AO observed that while the sale prices per unit transfer had gone up by 25%, the assessee was unable to give exact details of proportional increase in rise in prices of raw material components. Therefore, AO applied GP rate of 12% which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 63% in which prices increase but Ld. A.O. has not consider this price increase factor and ignore this factor of price increase in Raw Material. The during the year under consideration sales of the transformers were made for the following tender awarded to the unit. Tender No. KVA Rate per Transformer Amount Tender No. TN 318 awarded in the F.Y. 2005-06. 63 54967/- 4,19,58,535.00 Tender No. TN 225 awarded in the F.Y. 2005-06 25 28000/- 2,24,19,526.00 Tender No. TN 371 awarded in the F.Y. 2007-08 25 34158/- 29,54,86,782.00 Further I would like to state that during the year under consideration no any tender was awarded to assessee but supplies are continue against Tender No. TN 371. The Unit was established in the year 1983 and since than assessee is supplying Transfomers to RSEB. Low Gross profit rate That Gross profit rate fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raw material purchased by assessee was less than what was declared in the account books. There is no finding that the actual cost of processing carried out by the assessee was less than what had been declared in her books. No particular expenditure shown in the accounts books has been disallowed by the Assesing officer. There is no finding that the assessee had made any such sale of the finished product which was not reflected in the accounts books. There is no finding by the assessing officer that the finished product was sold by the assessee at price higher than what was declared in the accounts books. In these circumstances, the Ld. A.O. were not justified in estimating higher Gross profit rate than declared by asessee, merely because it was low as compared to the gross profit ratio of the preceding years. Keeping in view of above marginal fall in G.P. rate of 1.32% as compare to immediate previous year is justifiable. 5. After considering the submissions and perusing the material on record, the ld. CIT (A) allowed the appeal of the assessee in part. After considering the issue in detail, the ld. CIT (A) found that though provisions of section 145(3) are applicable, howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increase in sales and it is bound to be declined some GP ratio on this account also. Keeping in mind all these facts, we are of the view that if a lump sum GP addition at ₹ 5,00,000/- is made against 8.81% shown by assessee, that will meet the ends of justice to both the parties. We order accordingly. 10. There is no other ground in the appeal of the assessee. 11. Now we will take up the remaining grounds of appeal of the department. 12. The department is objecting in deleting the addition of ₹ 27,55,512/- made under section 40A(2)(b). 13. The AO disallowed payment of commission to persons mentioned in section 40A(2)(b), namely, S/Shri Vikram Gupta, Hari Om Gupta and Vikas Gupta. The AO held that assessee was unable to prove that the services provided by these persons had resulted in reduction of price of the item. The AO further observed that since the assessee had failed to discharge this onus cast on him, the payments made to them as commission were to be disallowed. Similarly regarding payment of commission to S/Shri Mukesh Rawat, Rajesh Rawat and Navratan Kumar Rajoria, the AO held that assessee had not provided any agreement entered into with these par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pta is as per market terms as he is purchasing CRGO Lamination on behalf of the unit the CRGO lamination in open market is available at ₹ 130.00 to 141.00 per kg. but due to very best efforts the same was procure through high sea purchases @ of ₹ 75.00 to 85.00 per kg. for that purpose assessee has paid commission @ of ₹ 1.25 per kg. which is justifiable for the services provided by Mr. Vikas Gupta because her efforts resulted into reduction of the prices of the CRGO Lamination hence commission paid is very reasonable and justifiable same are incurred for the reduction of prices of Raw Material and for business purpose only. SHREE HARI OM GUPTA That commission was paid to Shree Hari Om Gupta for procuring good quality of transformer oil at low prices than available in market the fair rate prevailing in market for Transformer oil is 34.25 to 35.00 per Liter but transformer oil purchases by Mr. Hariom Gupta was @ 33.00 per litre the same was available due to best efforts of Sh. Hariom Gupta copies of purchases bills and are than rate quotation is enclosed herewith for your ready reference hence commission paid to Mr. Hariom Gupta is reasonable and as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RAJESH RAWAT That commission was paid to Rajesh Rawat towards liaison with Jodhpur Vidhyut Vitran Nigam Ltd., Mr. Rajesh Rawat is well qualified and he is B.Com. and possess good liaison experience in this line of activity and handling the cases with Govt. and he help the assessee in obtaining tender with JVVNL and settling the disputes arises with JVVNL and also help in getting payments early towards supply of transformer with JVVNL, as by getting payments early assessee save interest on the Cash Credit facility obtained from SBI hence commission of ₹ 4,49,300/- paid is reasonable and as per prevailing market rate . 15. After considering submissions and perusing the material on record, the ld. CIT (A) found that all the commission agents were filing their return of income. The commission was paid as per agreement. Copies of returns filed by all of them declaring commission received as Income had been filed before the AO as well as before ld. CIT (A). It was also seen that similar payments were made in earlier years and there was no disallowance. Accordingly he allowed this ground of the assessee. 16. After considering the orders of the AO and ld. CIT (A) on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the total disallowance of ₹ 13,24,440/- made by the AO for payments made to clearing and forwarding agents. As per AO s observation at page 15 of his order, has applied the of provisions of section 40(a)(ia) in respect of he following payments to local transport parties made during the year : a) Agarwal Transport Organization ₹ 1,42,307/- b) Jaipur Golden ₹ 1,72,541/- c) Balaji Tempo ₹ 1,22,775/- Total ₹ 4,37,623/- The AR has submitted that these payments were made for transporting of goods and were by way of reimbursement and were not under any contractual liability. I find merit in the submission of the AR. The aforementioned payments were made to transport companies for transport of its goods. This was normal reimbursement of expenses and no contractual liability was made. Thus, it is not justified to disallow ₹ 4,37,623/- u/s 40(a)(ia). The disallowance is, therefore, directed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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