9911796707
TMI Blog2009 (2) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... s erred in confirming GP addition of ₹ 16,13,014/- by applying GP rate of 38.79% as against GP of 30.47% declared for the year. Your appellant submits that fall in GP is duly explained to A.O. and hence addition made is unjust and uncalled for. It be held so now and GP addition made by the A.O. be deleted now. (3) The Learned Commissioner of Income Tax (Appeals) has erred in confirming the calculation of deduction u/s. 80HHC of the Act by - (i) Reducing 90% of labour job income of ₹ 8,75,233/- from profits of business treating the same as 'other income'. Your appellant submits that since labour job income being earned in the ordinary course of business and taxed by the A.O. under the head 'business income', the same be treated as 'business income' A.O. be directed to allow deduction u/s. 80HHC on same. (ii) Reducing ₹ 9,03,365/- being additional income disclosed during survey. Your appellant submits that income disclosed during survey being earned in the ordinary course of business, be treated as business income and A.O. be directed to allow deduction u/s. 80HHC on same. 5. The Learned Commissioner of Income Tax (Appeals) has erred in confirming follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not pressed. 4. Grounds No. 2 & 3 of this appeal are common, inasmuch as they relate with regard to rejection of books of accounts under section 145 of the Act and consequential addition of gross profit of ₹ 16,13,014/-. The Assessing Officer has dealt this issue in para 3 at pages 2 & 3 of the assessment order. As per tax audit report, the gross profit is 30.47% and net profit is 7.48%. As against this, in the last year gross profit was 39.21% and net profit was 7.04%. During the course of assessment proceedings, the Assessing Officer asked the reasons for fall in gross profit. The assessee submitted that fall in G.P. is due to reduction in domestic sales and export sales being more as compared to earlier years. Thereafter the Assessing Officer asked the assessee to produce all the supporting documents for verification in support of its claim. The assessee also submitted that during the previous assessment year 2003-04, the assessee was having a merchant export of Epoxy Die and Soyabin Oil, which has a major contribution to gross profit and during the year, such merchant export was not there. It was submitted that average selling price of export in last year was more compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the books of accounts and adopting the GP rate of 38.79% shown by the assessee in the earlier assessment year. Aggrieved by the order of Learned Commissioner of Income Tax (Appeals), the assessee is in appeal before the Tribunal. 7. At the time of hearing before us, on behalf of assessee Shri Sunil H. Talati, ld. counsel appeared and argued at length by stating that the books of accounts should not be rejected. Without prejudiced to this contention, the ld. counsel of the assessee submitted that even if the books of accounts are rejected, no addition should be made because in the assessment year under appeal, the net profit percentage to sales is 7.48% as against 7.04% in the immediately preceding assessment year. At page 108 of the paper book, the assessee furnished the statement showing gross profit and net profit percentage to sales of four assessment years. 8. On the other hand, Shri K. Madhusudan, ld. Sr. D.R. appearing on behalf of the Revenue vehemently supported the order of Learned Commissioner of Income Tax(Appeals). He pointed out that neither before the Assessing Officer nor before the Learned Commissioner of Income Tax (Appeals), assessee produced the books of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss Profit % to sales 31.21% 39.21% 33.44% 39.57% Net Profit ₹ 14,50,071 14,85,442 1,23,961 6,64,100 Net Profit % to sales 7.48% 7.04% 0.81% 4.89% From the aforesaid chart, it appears that net profit to sales declared by the assessee is better than the immediately preceding year. However, we feel that this needs verification at the end of Assessing Officer. In case, net profit is better than the immediately preceding assessment year or more than average of last three years, in that event, no addition on account of low gross profit is called for. The Assessing Officer is accordingly directed to verify the working and if net profit percentage to sales is better than it was in the immediately preceding assessment year or average of last three assessment years, in that event, the Assessing Officer is directed to delete the addition of ₹ 16,13,014/- made by the Assessing Officer. 11. Ground No. 5 of this appeal is against confirming the addition of ₹ 3,05,000/- made by the Assessing Officer under section 69C of the Income Tax Act, 1961 and ₹ 5,60,000/- being repairs to machinery/ building disclosed as additional income during survey. 12. Brief f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Learned Commissioner of Income Tax (Appeals), the assessee contended that since the additional income declared during the course of survey has already been disclosed, the same cannot be added once again. The Learned Commissioner of Income Tax(Appeals) confirmed this addition. At the time of hearing before us, the ld. counsel of the assessee drew our attention to pages 10, 20 and 30 of the paper book, wherein the excess stock of ₹ 3,05,000/- and other income of ₹ 5,98,365/- totaling to ₹ 9,03,365/- has been separately shown. It was, therefore, contended that the Assessing Officer added the same income again under section 69C of the Act on the ground that excess stock unexplained is unexplained expenditure and similarly other three income are also required to be added separately in view of the provisions of section 69C of the Act. 14. On the other hand, the ld. D.R. vehemently supported the order of Learned Commissioner of Income Tax (Appeals). 15. Having heard both the sides, we have carefully gone through the orders of authorities below. Admittedly, during the course of survey, the assessee disclosed the income of ₹ 9,03,365/- and the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to verify the cash flow and to examine whether interest free loan were given out of borrowed funds for making new investment of ₹ 27,99,296/-. The Assessing Officer, therefore, worked out interest on the total loan funds as on 31.3.2004 of ₹ 36,47,786/- and made the addition of ₹ 2,88,678/-. The Learned Commissioner of Income Tax (Appeals) in the impugned order confirmed the said addition. 20. At the time of hearing before us, the ld. counsel of the assessee pointed out that the entire addition is totally baseless as because details of interest expenditure of ₹ 4,34,359/- are on page 23 of the paper book being schedule 14 of the audited accounts. The ld. counsel further submitted that interest on C.C. accounts, as seen on page 17 being schedule 3 of the audited accounts is against hypothecation of stock in trade and book debt is of just ₹ 6,11,110/-, so this is never allowed to investment by any bank and the only other loan was for car loan. The ld. counsel further pointed out that so far as the unsecured loans are concerned, it was ₹ 28.55 lakhs in the last year which had increased to ₹ 29.37 lakhs during the year under consideration, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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