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TMI Blog2016 (7) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... erform would come to the rescue of the assessee. Adoption of preceding year’s gross profit would only result in absurdity as rightly pointed out by the ld. CITA. We find that the assessee had declared profit at 8.42% in its return based on audited data. We find under these circumstances, the revenue had to place the complete reliance on the audited financial statements for the purpose of determination of total income. The ld. CIT-A had estimated the total income at 10% of turnover. However , we, in our considered opinion, in the facts and circumstances of the case, especially considering the state of affairs in which assessee is placed, feel that adoption of profit at the rate of 9% of turnover would meet the ends of justice. The ld. AO is directed to adopt 9% of turnover as income of the assessee as against 42.48%. Accordingly the grounds raised by the revenue are dismissed and cross objections of the assessee are partly allowed. - I.T.A No. 2318/Kol/2013, C. O. No.106/Kol/2014 - - - Dated:- 8-7-2016 - Shri M. Balaganesh, AM And Shri S. S. Viswanethra Ravi, JM For the Revenue: Shri G. Mallikarjuna, CIT, DR For the Assessee/Cross Objector : Shri Somnath Ghosh, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the gross profit at ₹ 10,00,76,590/- as against ₹ 1,98,38,326/- disclosed by the assessee thereby making an addition of ₹ 8,02,38,264/- as concealed gross profit and framed the assessment u/s 144 of the Act. 4. On first appeal, the ld. CITA vide para 7.1 of its order has observed as follows:- 7.1. On perusal of the assessment it is seen that the AO did not dispute the turnover shown by the appellant or the other incidental expenditure incurred for effecting such turnover to the extent of ₹ 23,55,85,195/-. Therefore, it can be said that the turnover and expenditure incurred during the assessment year under dispute were not doubted by the AO. His only grievance was that the rate of G.P. in the concerned assessment year was low in comparison to the immediately earlier assessment year. He has not even discussed anything in the assessment order or given any acceptable reason for adopting the G.P. rate of earlier year and application of the same in the impugned assessment year when admittedly the AO did not dispute the factual position as explained by the appellant. In fact, the situation prevalent in the assessment year 2008-2009 is thoroughly distingui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver shown and accepted by the AO is taken @ 10%. I, therefore, direct the AO to take G.P. @ 10% on the admitted turnover instead and place of 8.15% disclosed by the appellant and determine the income accordingly. Ground No. 1 and 3 is partly allowed to the above extent. 5. Aggrieved, the revenue is in appeal before us on the following grounds:- Assessment was completed on the basis of materials available on record and rate of G.P. of 42.48% as disclosed by the assessee during the assessment year 2008-09 was adopted instead of 8.42% as disclosed for this assessment year. Ld. C.I.T (A) has erred in restricting the G.P rate at 10% without any basis, whereas in the financial year 2007-08, the G.P rate disclosed by the assessee is 42.48% which was adopted by the AO while passing the ex-parte order. Ld. C.I.T (A) has erred in concluding that this estimation made by the AO was without any basis. The AO was compelled to pass ex-parte order u/s.144 of the I. T. Act, 1961 due to non-cooperation of the assessee and adopted the G.P rate which was disclosed by the assessee itself during the financial year 2007-08. The assessee had also raised cross objections before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. In response to this, the ld. AR argued that there was total inability on the part of the assessee to produce the details called for by the ld. AO as stated supra and the ld. CITA had clearly stated that the turnover of the assessee had increased by 7 times during the year under appeal as compared to the immediately preceding asst year and for which purpose, the assessee had to obviously compromise on the gross profit margins. In any case, the gross profit determined by the ld. AO was more than 5 times of the declared amount without offering any clinching proof in this respect. This only results in absurdity and it is practically not possible to earn this much of profit in the industry in which assessee was involved. He further argued that the identical issue came up before this tribunal in the case of sister concern of the assessee in the case of ACIT vs Sitalamata Rice Mill Pvt Ltd in ITA No. 2317/Kol/2013 dated 1.1.2015. 8. We have heard the rival submissions including the paper book filed by the assessee from pages 1 to 102. We find that the accounts of the assessee were duly audited and no adverse inference was drawn by the auditor. The books of accounts could not be pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them. Thus, not only in respect of the relevancy but also in respect of proof the material which can be taken into consideration by the Income-tax Officer and other authorities under the Act is far wider than the evidence which is strictly relevant and admissible under the Evidence Act. Under section 34 of the Indian Evidence Act account books maintained in the regular course of business are evidence after the relevant entries are proved by oral evidence or are admitted. The Income-tax Officers, however, have to deal with such numerous cases of assessment that they can accept as correct books of account maintained in regular course of business without such a formal proof. In the present case, the relevant books of account in which detailed information as to the expenses which were claimed as deductions for the assessment years 1962-63 and 1963- 64 are destroyed by fire in November, 1962. Under the Indian Evidence Act secondary evidence of the contents of these account books would have to be adduced if they were to be used to prove any fact. The external auditors of the assessee-companies had, however, made their annual reports under section 227(2) of the Companies Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted and does not, therefore, call for reference. Point No. 2 The Tribunal has stated that, though, ordinarily, the adjustments relating to expenses should have been made by the assessees in the accounts of the year to which the adjustments relate and not in a subsequent year, it is often inevitable that such adjustments relating to earlier years have to be made in subsequent years. This is specially so, when the business, as of the assessees, is of giant proportions and the branches are farflung. The Tribunal has also very properly relied upon the auditors' reports to draw the proper inference from the same. Since the evidence in income- tax proceedings need not consist necessarily of evidence admissible under the Evidence Act but may consist of other material which has a probative value, the Tribunal was justified in taking such material into account. It cannot, therefore, be said that the decision of the Tribunal was not based on any evidence. On the contrary, it was based on evidence meaning thereby that it was based on relevant material which can be considered in the income-tax proceedings. The applications are, therefore, dismissed. 8.1. It is an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts had to be made to increase the net profit to service the debt. But even after such attempts, the assessee had to suffer the extreme prejudice of being taken over by the bank. We find that this is a telling instance of the assessee failing in its efforts to achieve its objects through its actions. We find that the ld CITA had categorically stated that the turnover and the direct expenses incurred by the assessee has not been disputed by the Ld. AO. We also find that the trading account cannot be interfered with unless purchases are proved to be bogus or overstated or sales are understated. In the instant case, no such stance has been taken by the ld. AO. No anomalies were found by the ld. AO on the purchases, sales and closing stock declared by the assessee. The Ld. AR filed a comparison of the trading account for the years ended 31.3.2009 (year under appeal) and that of 31.3.2008 (preceding year). From the same it could be seen that the gross profit during the year had reduced by 34.06%; consumption to the percentage of turnover had increased by 34.95% and direct expenses had decreased by 0.89% in the year ended 31.3.2009 when compared to that of the immediately preceding year. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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