9911796707
TMI Blog2016 (6) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/- (iii) Addition on account of low G.P. Rs. 29,67,013/- 2.2 Aggrieved by the order of assessment for A.Y. 2011-12 dated 28.02.2014, the assessee preferred an appeal before the CIT(A)-25, Mumbai. The learned CIT(A) disposed off the assessee's appeal vide the impugned order dated 08.05.2014, allowing the assessee partial relief by deleting the addition of Rs. 36,000/- made on account of household expenses. The learned CIT(A), however, upheld the Assessing Officer's (AO) action in disallowance of Rs. 3,00,000/- under section 40A(3) of the Act and the addition of Rs. 29,67,013/- on account of low G.P. 3. Aggrieved by the order of the CIT(A)-25, Mumbai dated 08.05.2014 for A.Y. 2011-12, the assessee has preferred this appeal raising the following grounds: - "I) Rejection of Books of accounts and estimation of G P 1. On the facts and under the circumstances of the case, the Ld. CIT (A) erred in upholding the decision of the AO in estimating G P @ 0.5% against the G P declared by the appellant of 0.26% after rejecting the books of accounts. The same is bad in law and against equity, natural justice, good conscience and fair play. 2. The Ld. CIT (A) failed to consider that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of hearing on a number of occasions none was present for the hearings and no application for adjournment of hearing was filed by the assessee. Even the notice issued by RPAD was returned back unserved with the remark "Left". Even today, i.e. 26.04.2016 when the case was called for hearing, none was present on behalf of the assessee, but the learned D.R. for Revenue was present and ready to present Revenue's case. In these circumstances, we are of the view that the assessee is not seriously interested in pursuing this appeal and we, therefore, proceed to dispose off this appeal with the assistance of the learned D.R. and the material on record. 5. Grounds I (1 to 4) - Rejection of Books and estimation of G.P. 5.1 In these grounds (supra), the assessee contends that the learned CIT(A) had erred in upholding the decision of the AO in estimating the G.P. @0.5% as against the G.P. of 0.26% declared by the assessee after rejecting the assessee's books of account. It is contended that the assessee had maintained proper books of account, which were audited under section 44AB of the Act and the profits of the assessee's business being discernable from the accounts maintained, the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken a0.5% of total sales of Rs. 123.73 crores. In response, the AR of assessee submitted that the accounts are regularly maintained, which are consistent and results of profits/losses could be well deduced, hence the question of rejection of books of accounts didn't arise. The aforesaid submission of assessee was not found satisfactory and acceptable by the AO. He pointed out that the assessee failed to prove the nexus by correlating the purchase cost of a particular lot of diamonds and its corresponding sales value showing that the G.P. margin in the transaction was very low. The assessee's arguments that the accounts were audited and maintenance of stock register is not mandatory were also rejected by AO. The AO observed that in preceding A.Y. 2010-11, the G.P. ratio of 0.24% was achieved due to Exchange Loss Difference of Rs. 2,29,51,911/-, excluding which the assessee had made huge gross profit of Rs. 2,49,42,743/-. Hence, there was a vide variation in the reported business results for these two years. The AO rejected various other arguments of the assessee. Finally, the AO rejected the books of accounts and estimated the G.P. ratio of 0.5% on total sales of Rs. 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through peculiar condition wherein trade has become so competitive that traders do business at the lowest margin of profit i.e. 0.1% or sometimes at loss in order to exist in the market." 4.3 I have perused the facts of case and submissions of appellant very carefully. For easy understanding, the comparative figures available on records for three assessment years are tabulated below: (Rs. in crores) Particulars A.Y. 2011-12 (under consideration) A.Y. 2010-11 A.Y. 2009-10 Sales 123.73 91.15 51.17 Gross Profit/(Loss) 0.32 0.22 0.20 G.P. Ratio shown by appellant 0.26% 0.24% 0.30% Exchange Profit/(Loss) Difference included in Gross Profit 1.57 (2.29) (2.29) Gross Profit/(Loss), excluding Exchange Profit/Loss Difference (1.25) 2.51 2.49 Resultant G.P. Ratio -1.01% 2.76% 4.87% It can be observe from the above, that the appellant's sales has grown from Rs. 91.15 crores in A.Y. 2010-11 to Rs. 123.73 crores in A.Y. 2011- 12 under consideration, still the gross profit ratio excluding the Exchange Difference has decreased from 2.76% to -1.01%. The appellant has however maintained to show the G.P. ratio in positive in A.Y. 2011-12 under consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge Difference profit of Rs. 1.57 crores as against Exchange, Difference loss of Rs. (2.29) crores in A.Y. 2009-10, the full effect of which is hardly reflected in the net additions made by AO @0.18%, as against 0.1% confirmed for A.Y. 2009-10. In the aggregate of aforesaid discussions, I do not find the estimation made by the AO unreasonable, and hence there is no need to interfere with the same. Therefore, the addition made of Rs. 29,67,013/- is confirmed and the ground no. I of appeal is dismissed." 5.3.2 We find that, as contended by the learned D.R. the learned CIT(A) has addressed the issue in detail in the impugned order (supra) covering all the grounds raised at S.No. I (1 to 4) before us (supra). We further observe that the assessee has failed to place on record material evidence to controvert the findings of the learned CIT(A) on the issue of rejection of books and estimation of G.P. In this view of the matter, we are of the considered opinion that there is no cause for us to interfere with or deviate from the decision of the learned CIT(A) and therefore uphold his findings on rejection of the assessee's books of account and the estimation of G.P. @0.5% consequently lead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount in 3 equal installments were transferred from their advance account to salary account. The AO did not find the said explanation of appellant as tenable in law. According to him, the question that since they became a salaried employee of assessee only w.e.f. 01.01.2011, then what was the necessity for the assessee to advance an amount to any unknown person, remained unanswered by the assessee. The assessee's contention that salaries were paid at random from time to time and journal entries passed for different months was also not acceptable since the amount was so paid to Mahesh Verma on only two occasions, and to Mr. Milind Dighe at only one occasion. The assessee's arguments that payment of Rs. 50,000/- to Milind Dighe included in Rs. 2,00,000/- given on 13.01.2011 by cheque) was for the month of April, 2011 was also far from truth, since the said amount was not reflected in Loans & Advances in assessee's balance sheet as on 31.03.2011. The assessee's submissions also lacked justification for having made high end payment of salary of Rs. 50,000/- to both of them, especially when the rests each of 16 employees had been paid less than Rs. 20,000/-. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I find that the appellant has neither submitted any documentary evidence in support of their expertise in the field of Diamonds to justify the higher salaries paid to them compared to other employees, nor any contract with the employees to show that the said amounts were being paid towards advance salaries. In normal circumstances, the payment of advance salaries for several months, that too even before appointment in one case, certainly raises doubt as to the genuineness of expenses booked by appellant. In the case of Milind Dighe, the advance payment is shown upto April, 2011 i.e. extending to next financial year, which certainly would be avoided by any businessman under normal circumstances. Such advance payment of Rs. 50,000/- appearing as on 31.03.2011 in name of Mr. Milind Dighe under the head "Advance to Suppliers" does not by itself prove the genuineness of expenses booked by the appellant. The appellant has not submitted sufficient evidence to prove that the said payments were genuinely made towards salaries. Also the appellant's contention that the AO should not make separate addition on account of disallowance of salary when he has estimated the G.P. as a whole is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
