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TMI Blog2016 (7) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... timate the profit on the so-called sale of deficit stock to the extent of ₹ 55,75,603/- Coming to the gross profit, the Assessing Officer determined the gross profit at 20%. The Assessing Officer has not taken the past history of the assessee or the profit, etc. of the similarly placed industries. The Assessing Officer without any basis determined the profit at 20%. The assessee otherwise claims before this Tribunal that the profit in this kind of industry is 12 to 15%. Therefore, this Tribunal is of the considered opinion that estimation of profit at 15% of the deficit stock of ₹ 55,75,603/- would meet the ends of justice. Accordingly, the orders of the authorities below are modified and the Assessing Officer is directed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Ld. counsel, the Assessing Officer estimated the manufacturing cost at 24%. According to the Ld. counsel, the manufacturing cost is not 24% and the estimation made by the Assessing Officer is on the higher side. On a query from the Bench what would be the reasonable manufacturing cost? The Ld.counsel very fairly submitted that the manufacturing cost in normal circumstances is around 10% to 15% and definitely not at 24%. Therefore, according to the Ld. counsel, the addition made by the Assessing Officer on the deficit stock is not justified. 3. Referring to the order of the CIT(Appeals), the Ld.counsel for the assessee submitted that the CIT(Appeals) computed the deficit stock at ₹ 55,75,603/- as against the deficit stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees. Therefore, at this stage, the assessee cannot say that the inventory was not taken properly. The Ld. D.R. further submitted that the Managing Director of the assessee-company has not disputed the manner in which the physical inventory was taken. Therefore, there is no justification in the contention of the Ld.counsel for the assessee that the physical inventory was not taken properly. In fact, according to the Ld. D.R., the physical inventory was taken properly and it was quantified by the Assessing Officer at ₹ 98,61,818/-. After considering the sales as per sales tax return, the Assessing Officer estimated the deficit stock at ₹ 2,70,85,031/-. The profit on the deficit stock was computed at 20% and the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer added 20% as gross profit to the extent of ₹ 3,43,60,886/- and ultimately estimated the deficit stock at ₹ 2,70,85,031/-. The CIT(Appeals), however, estimated the deficit stock at ₹ 55,75,603/-. This deficit stock computed by the CIT(Appeals) is not challenged by the Revenue. In other words, the Revenue has not filed any appeal against the order of the CIT(Appeals) determining the deficit stock at ₹ 55,75,603/-. 7. Now the question arises for consideration is whether the entire deficit stock has to be taken as profit of the assessee or the profit element embedded in the deficit stock has to be taken as income of the assessee? The Assessing Officer himself has taken only 20% of gross profit on the de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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