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TMI Blog2017 (3) TMI 956X X X X Extracts X X X X X X X X Extracts X X X X ..... been maintained properly in spite of fact that assessee is registered with excise department and all the records have been maintained regularly as required under relevant Act/rules". "2. The Ld. CIT (Appeals)-II has erred in law as well as on facts while considering the addition of Rs. 498,414/- being interest paid without deduction of tax at source u/s 40a(ia)". "3. The Ld. CIT (Appeals)-II has erred in law as well as on facts while making disallowance of Rs. 388,276/- out of Interest exp. assuming notional interest income on advance paid." 2. Firstly, we take up the ground regarding rejection of books of accounts and estimation of gross profit rate. Briefly, the facts of the case are that the assessee is engaged in the business of manufacture of DPC Copper wire and aluminium wire. For the year under consideration, the Assessing officer observed that though the turnover has increased vis-a-vis last year, the gross profit ratio has dropped to 4.74% as against 7.46% in A.Y. 2010-11 and 5.06% in A.Y. 2009-10. The Assessing Officer thereafter found certain defects in the books of accounts and basis that, the books of accounts were rejected. Being aggrieved, the assessee carried t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egister for insulation material or kraft paper is maintained. This has been discussed in detail by the Assessing Officer in para 3.1(iii) of the Assessment Order. In view of the specific defects pointed out by the Assessing Officer which the appellant has not been able to fully explain, as discussed above, the books of accounts are rejected u/s. 145(3) of the I.T. Act". "2.4 The Assessing Officer has estimated the turnover at Rs. 10,70,00,000/- as against Rs. 10,48,03,179/- shown in the books of accounts. The appellant has submitted the copy of assessment order of VAT/CST in which the turnover of the assessee has been accepted at almost the value disclosed in the books of accounts. In view of the above, I do not agree with the Assessing officer in estimating its turnover at Rs. 10,70,00,000/-. Instead, the turnover disclosed in the books of accounts is accepted. As regards the estimation of G.P. rate is concerned, it is seen that the turnover of the appellant has increased from Rs. 6,40,57,943/- in A.Y. 2010-11 when its G.P. rate was 7.46% to Rs. 10,48,03,179/- in this previous year, when its G.P. rate has declined to 4.75%. An increase in turnover would invariably lead to some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aft Paper 92 @ 90 We are submitting herewith copy of invoices in support of our above submission. From the above, your goodself will find that the assessing officer's observation is not correct. 5. The ld AR further reiterated the following facts as submitted during the assessment proceedings: 5.1 Due to fluctuation in copper rates in international market, the assessee could not maintain the G.P. rate. We are enclosing herewith monthly rate chart of copper wire of Hindustan Copper Lts. and Sterlite Industries Ltd. which shows that copper wire rates were fluctuated between Rs. 337 per Kg. to Rs. 495/- per Kg. during the year. 5.2 Further, as per practice adopted by Vedanta (Sterlite Industries Ltd.) the supplies were made during the month as per provisional rates and final rates were decided at the end of the month for supplies made. We had enclosed copy of rates structure of July 2010 determined by Sterlite Industries Ltd. as example. 5.3 Due to fluctuation in copper rate and price fixation system adopted by suppliers, the assessee had to sale the goods at part in April 2010 and June 2010 and in other months at very low margin without recovering the manufacturing exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, electronics industries and electricity boards. All the purchases and sales are from registered dealers of VAT/CST and fully vouched. We are enclosing herewith copy of account of Pashupati Enterprises who is authorized dealer of Hindustan Copper Ltd. From whom purchases have been made Rs. 716.57 Lacs out of total purchases of Rs. 1009.89 Lacs. 7.2 The assessee is also Registered under VAT/CST Act, and is being regularly assessed by CTO "Ë" circle Jaipur. We have already submitted the assessment order of VAT/CST act which shows the turnover(sales) of Rs. 103260960/- and is being again enclosed for ready reference. We have already explained the reasons of differences in sales of Rs. 32384/- in our letter dt. 14.10.2013. 7.3 The assessee is registered under Excise Act since long. All the records have been maintained and are being maintained regularly which have been checked by Excise authorities during their visit at factory. All the returns and audit have been conducted by Excise authorities and no discrepancy was noticed. 7.4 The assessee's product is Excisable commodity and excise is based on sale value and any undervaluation of sales directly affects the revenue of excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of above, the accounts are correct and complete and assessing officer's action of applicability of section 145(3) is arbitrary and is bad in law. 7.11 As regards, valuation of stock, the Income Tax Act and Income Tax Rules does not prescribe any particular method of valuation of stock. The assessee may value its stock either at cost price or at market price whichever is lower. In this case also, the assessee has valued the stock of copper wire in two parts:- (a) Normal Stock: At cost Price. ITO has accepted the valuation and raised no objection. (b) Sub-standard Stock: At Realizable value for which the assessee has submitted the proof of actual realization in F.Y. 2011-12 (A.Y. 2012-13). 7.12 Assessment for ensuing years have also been completed u/s 143(3) and declared results were accepted as under:- A.Y. 2013-14 Sales/Job Work 82121707/- Gross Profit 4404727/- 5.36% Net Profit 1481860/- 1.80% Assessment completed by ITO Ward 4(2) Jaipur. Additions/disallowance: NIL A.Y. 2014-15 Sales/Job Work 92801471/- Gross Profit 4697268/- 5.06% Net Profit 1601125/- 1.72% Assessment completed by ITO Ward 4(3) Jaipur. Additions/di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsformers & Switchgears (P) Ltd. 186.98 Lacs Balance outstanding at year end .24 Lacs (Excess Received) From the above submissions, your goodself will find that reduction in G.P. Rate is very much supported with documentary evidences and therefore declared results deserves to be accepted. 7.14 The ld AR also relied upon the decision of Hon'ble High Court of Delhi in the case of Commissioner of Income Tax V/s Paradise Holidays, IT Appeal No.445 of 2010 dt. 28.04.2010 (2010) 325 ITR 13 (Del.). In this Case it was held as under: "The question as to whether the accounts produced by the assessee were defective or not is a question of fact. The CIT(A) as well as Tribunal have found that the accounts maintained by the respondent were neither defective nor incomplete. Even the AO has not found any fault as such with the system of accounting being followed by the assessee. The tribunal which is the final fact-finding authority has held that considering the nature of the business of the assessee, it was not obligatory to enter into a formal agreement with the foreign principal. Hence non-production of formal agreement with the foreign principals would not render the accounts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee raises the necessary debit notes on its customers to recover the differential price than billed provisionally. The differential pricing and all the sales have been duly recorded in the financial statement which has been duly audited. The Assessing Officer has also disputed the turnover of the assessee and computed the same at Rs. 10.70 Cr. as against Rs. 10.48 Cr. shown in the books of accounts. The Ld. CIT(A) has upheld the turnover figure as reflected in the books of accounts and the Revenue is not in appeal against the said confirmation of the turnover as upheld by the Ld. CIT(A). Effectively, the price at which the goods have been sold during the year has been accepted by the Revenue and the same cannot, therefore, be a basis for upholding the rejection of books of accounts. Secondly, regarding the under valuation of the sub-standard stock, the assessee has submitted that the same has been valued at a realizable value at which such stock has been sold in the subsequent F.Y. 2011-12 as demonstrated through actual sales invoices and the results of the subsequent financial year have been accepted by the Revenue. Further, it is noted that the assessee is in the same line of bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid observation has now been upheld by different benches of Tribunal - Teja Consturction V. CIT(2010)39 sot 13 (Hyd.). Merilyn Shipping & transporters V. CIT(2012) 20 taxmann.com 244 (Visakapattnam), S.S. Warad V. CIT(2012)19 ITR (Trib.) 35 (Bang.). T.T. Kuruvilla v. CIT (2012) 149 TTJ (Coch.) 533. Emdee Apparels v. CIT (2012) 54 SOT 600 (Bang.), Barronics India Ltd. v. CIT (2012) 52 SOT 188 (Hyd.), Cadtrium Engineering Solutions (P) Ltd. v. ITO (2013) 33 taxmann.com 269(Delhi), ITO v. Vinod Datta (2013) 33 taxmann.com 440 (Mum.) ITO v. MGB Transport(2013) 143 ITD 564 (Kol.) Cadtrium Engineering solutions (P) Ltd. v. ITO (2013) 58 SOT 3 (Delhi). A similar ruling is given by the Allahabad High Court in the case of CIT v. Vector Shipping Services (P) Ltd. (2013) 218 taxmann 93 (SLP against this judgment has been rejected by the Apex Court on July 2, 2014). 13. It was further submitted that the assessee has debited Rs. 498414/- as interest payment to Reliance Capital Ltd. and total amount has been paid during F.Y. 2010-11 (A.Y. 2011-12) in monthly instalments and nothing was payable at the end of the F.Y. 2010-11 i.e. as on 31.03.2011. We are enclosing herewith copy of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open to the Tribunal either to follow the Special Bench decision or not to follow. If the special Bench decision is not followed, obviously remedy lies elsewhere." 2.6 Subsequently, the Coordinate Bench in case of Shri Amit Naresh Shah in ITA No. 4154/Mum/2013 dated 10.09.2014 taking into cognisance the decision of Hon'ble Andhra Pradesh High Court in case of Janapriya Engineers Syndicate (supra) has held as under: "From the clarification issued by the Hon'ble High Court, it is clear that until and unless the decision of Marilyn Shipping and Transport (supra) is reversed by the court, it is binding on all the benches of the Tribunal. We find that Hon'ble court has held that judicial discipline mandates that the decision of the special bench has to be followed by other benches. As on today, the stay order granted by the Hon'ble court has been vacated and the order of the special bench is binding on other benches of the Tribunal. Therefore, respectfully following the same, we hold that the FAA was justified in following the order of Marilyn Shipping & Transport (supra). Considering the facts of the case and the clarification issued by the Hon'ble Andhra Pradesh High court on 24. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o urgent requirement of funds in the normal course of business. The appellant has stated that it has received interest free loans also. As per the ld CIT(A), this contention of the appellant is not acceptable because the assessee has not able to show that moneys were advanced to the above two persons for business purposes. Also, the appellant has not been able to establish any nexus between the interest free loans and the interest free advances given by it. In view of the above, the disallowance of interest expenditure made by the Assessing Officer @ 12% on the interest free advances was sustained since this part of the expenditure has not been incurred for business purposes or for any commercial expediency. 17. In this regard, the Ld. AR submitted that during the year under consideration the assessee had paid advance to Smt. Sneh Lata Jain and Yash Doshi. The amount was given for meeting out urgent requirement of funds for a short period but not in the nature of loan and therefore no interest was charged. We are summarizing the loan position as under:- 1. Smt. Sneh Lata Jain Opening Balance 3216365/- Paid during the year 04.10.2010 1000000/- 4216365 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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