9911796707
TMI Blog2019 (9) TMI 1069X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee in Schedule 19 of the Balance Sheet, based upon which certain conclusions were drawn. Quantitative discrepancies, if any, stood explained by the fact that the assessee s nature of business made it impractical to report the quantitiative details in the desired manner. The perusal of sample invoices, as produced before us, would support the fact that the assessee was procuring raw material from several vendors which would be assembled into a composite product which could be sold with or without software and the sale transaction could be with or without service contracts. Those facts would explain non-reporting of quantitative details in Schedule 19 of the Balance Sheet and therefore, the conclusions drawn by Ld. AO from the same would obviously distort the factual matrix. Gross Profit rate in earlier years were much lower after excluding the service income. So far as the reconciliation of Service income TDS figures reported in Form 26AS is concerned, no specific allegation of non-reporting of any income has been made by Ld. AO in the quantum assessment order and therefore, no adverse conclusion could be drawn therefrom. FAA has clinched the issue in the right perspective and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng manner: - Description of receipts Opening stock Purchases Sales Closing Stock Qty Value Qty . Value Qty Value Qty . Value Hardware, Server & Accessories 185 378376 176910 678635958 172103 52921922 5008 25442085 Software - 0 - 427226891 -- 34188645 -- 5144857 Others - 9371819 -- 181555119 -- 1282483853 -- 4937404 185 9750195 176910 1287417968 172103 1369594420 5008 35524346 The Ld. AO, on the basis of above table, made the following observations: - i) The assessee had 1,77,095 (Opening + Purchases hardware items amounting to ₹ 67,90,14,334/-) at its disposal for sale having average cost per item @ ₹ 3834/-. Out of these items, the assessee sold 172103 items for ₹ 5,29,21,922/- at an average cost of ₹ 307/- i.e. much below the purchase cost. ii) There are no quantitative details of software items. But the above table shows that the software worth ₹ 42,20,82,034/- [Purchase ₹ 42,72,26,891/- (-) Closing stock ₹ 51,44,857/-] have been sold for ₹ 3,41,88,645/- which is much below the purchase price. iii) The assessee had items amounting to ₹ 19,09,26,938/- (Opening + Purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith a residuary class titled as 'Others' in which case, it may not be possible to provide quantitative particulars. Nevertheless, the summary value of this classification remains accurate, which will match with the figures reflected in Profit and Loss Account. The classification in Schedule 19 will involve some estimation on account of the nature of procurement and sales. It was further submitted that the stock records were maintained in SAP, an Enterprise Resource Planning (ERP) application. 2.3 However, since the assessee, in the opinion of learned AO, neither submitted reconciliation nor even furnished quantitative details of the items including the items dealt with under the head "others" and therefore, the submission was vague, general and unsatisfactory as it failed to explain the discrepancies. In the above background, a conclusion was drawn that the assessee was claiming the purchase cost of the computer peripherals (Hardware/software/others) on which it had earned non-trading income of ₹ 57.65 Crores in form of technical fees, service charges, maintenance charges etc. Therefore, the purchase cost was to be capitalized against which the depreciation would be admissib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gures were already included in the income reflected by the assessee for the year under consideration. 2.5 However, not satisfied and finding that there was a fall in Gross Profit Rate during the year, Ld. AO rejected the books of accounts u/s 145(3) and estimated the Gross profit (GP) Rate of 18% against Sales of ₹ 136.95 Crores which resulted into GP addition of ₹ 13.58 Crores in the hands of the assessee. The rate of 18% was primarily derived from the fact that GP rate earned by the assessee for AYs 2008-09 & 2009-10 was 18.13% & 18.76% respectively. 2.6 Subsequently, the assessee preferred a rectification application u/s 154 against the assessment order to bring to notice the fact that after excluding the revenue from service income, the gross GP rate for AYs 2008-09 & 2009-10 would be 10.77% & 9.61% respectively and therefore, quantum assessment order would require rectification in the light of those facts. However, the said application also got rejected. Aggrieved, the assessee preferred appeal against the quantum assessment order framed by Ld. AO and also agitated the rejection of rectification application u/s 154 before first appellate authority. 3.1 The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al matrix. 5. We have duly considered the rival submissions and deliberated on the judicial pronouncements as referred before us. After due consideration of factual matrix, we find that the assessee is a corporate entity and it accounts were subjected to Audit under The Companies Act as well as under The Income Tax Act. No qualification / adverse remarks have been made by the auditors regarding maintenance of stock records / valuation etc. The figures of sale as well as purchases, on aggregate basis, as per books of accounts perfectly matched with assessee's financial statements. The assessee had produced all sales as well as purchase invoices in digital form before Ld. AO during assessment proceedings. However, no discrepancies could be pointed out in the same by Ld. AO. Further, no specific defects were pointed out in the books of accounts as well. The whole allegation of Ld. AO emanates from figures reported by the assessee in Schedule 19 of the Balance Sheet, based upon which certain conclusions were drawn. However, quantitative discrepancies, if any, stood explained by the fact that the assessee's nature of business made it impractical to report the quantitiative details in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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