9911796707
TMI Blog2016 (12) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Year 2010-11. 2. Facts of the case, in brief, are that the assessee is an individual and is engaged in the job work and manufacturing of Autoparts under the name of "Sanmati CNC Engineering works". She filed her return of income on 28-09-2010 declaring total income of ₹ 10,25,050/-. The return was accompanied with tax audit report, profit and loss account and balance sheet and computation of income. During the course of assessment proceedings the Assessing Officer observed that the assessee has shown gross profit of ₹ 95,96,791/- on a turnover of ₹ 5,57,17,210/- which works out to 17.22%. He observed that in the immediately preceding assessment year on a turnover of ₹ 4,33,23,476/- the assessee had shown gross profit of ₹ 84,00,219/- which works out to 19.39%. From the various details furnished by the assessee he observed that the gross profit for the A.Y. 2008-09 was shown at 26.34%. On being questioned by the Assessing Officer to justify the reasons for fall in the GP it was submitted that due to continuous increase in recasting, consumables, tools, lubrication, transportation, wages and power consumption the gross profit rate has been reduced. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 2,84,707/- as excessive and unreasonable. 6. The Assessing Officer further noted that during the year the assessee has shown sale of scrap to the tune of ₹ 79,27,682/-. However, no stock of scrap has been shown in the books of account. On comparison of sale of scrap with earlier years he noted that this scrap shown for the impugned assessment year is on the lower side, the details of which are as under : A.Y. Scrap sale (Rs.) Total turnover (Rs.) % of scrap sale wrt turnover 2010-11 79,27,682 5,57,17,210 14.22% 2009-10 67,35,354 4,33,23,476 15.54% 2008-09 63,63,368 3,37,55,373 18.85% 16.20% He, therefore, asked the assessee to justify the same. It was explained by the assessee that the generation of scrap depends on the type of job work undertaken, reduction etc. and sale depends upon the volume of scrap generated, market rate etc. It was argued that the assessee has sold all the scrap through separate invoice and therefore the figures so declared should be accepted. 7. However, the Assessing Officer was not fully satisfied with the explanation given by the assessee. He observed that although there is some force in the assessee's submission and argument, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ences the Assessing Officer disallowed on adhoc basis 50% of such expenses and made addition of ₹ 2,80,887/-. Similarly, out of the various other expenses the Assessing Officer disallowed 20% of such expenses on the ground that these are supported by self made vouchers and the identity of the persons receiving the payment is not verifiable. In respect of telephone, travelling, vehicle maintenance some element of personal expenses is also embedded in these expenses. Thus, the Assessing Officer made addition of ₹ 3,54,651/- out of the various expenses, the details of which are as under : Nature of expenses Amount claimed Amount disallowed Labour welfare 3,96,837 79,367 Office expenses 79,918 15,983 Telephone expenses 2,03,227 40,645 Travelling expenses 3,96,417 79,283 Vehicle maintenance 1,19,318 23,863 Repairs & maintenance 5,77,554 1,15,510 Total 3,54,651 The Assessing Officer thus made addition of ₹ 33,90,712/- on various heads as discussed above and determined the total income at ₹ 44,15,760/- against ₹ 10,25,047/- declared by the assessee. 10. In appeal the Ld.CIT(A) upheld the action of the Assessing Officer and dismissed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enhancement of income made by the A.O. and confirmed by CIT(A) without following due process of law? Whether it would be called 'Real Income' which real income is required to be taxed under the provisions of Income-tax Act? (7) On the facts and circumstances of the case and in law the levy of interest u/s 234A, 234B and 234C is not justified. (8) The appellant craves to leave, add/amend or alter any of the above grounds of appeal." 11. The Ld. Counsel for the assessee relying on various decisions submitted that when the Assessing Officer has rejected the book results he could have estimated the profit and could not have made separate addition on account of various heads. He submitted that if the addition made by the Assessing Officer which has been upheld by the CIT(A) is accepted then GP comes to 23.31% which is very much on the higher side. He submitted that the assessee has maintained books of account which are duly audited and the auditors have not pointed out any mistake. Therefore, no addition should have been made on account of machining charges, sale of scrap, loading and unloading expenses and the disallowances of various expenses. 12. In his alternate argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in the GP and could not point out as to how the order passed by the Assessing Officer is unreasonable. It is the submission of the Ld. Counsel for the assessee that when the Assessing Officer has rejected the books of account by invoking the provisions of section 145(3) he should have gone for GP addition and should not have gone for disallowance of various expenses. It is also his submission that if the addition made by the Assessing Officer which has been sustained by the CIT(A) is accepted then the GP rate comes to 23.34% which is not possible in this line of business. 16. It is also his submission that since the books of account are audited and the auditors have not pointed out any mistake and the addition made by the Assessing Officer is based on purely surmises and presumptions, therefore, such addition should be deleted. I do not find much force in the above submission of the Ld. Counsel for the assessee in the above arguments since the Assessing Officer has conducted indepth enquiry to find out the fall in the GP rate as compared to the preceding assessment year. However, I find some force in the argument of the Ld. Counsel for the assessee that if the huge addition as m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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