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TMI Blog2020 (9) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee filed submissions stating that the return filed u/s.139(1) of the Act may be treated as return filed in response to notice u/s.153A of the Act The Assessing Officer completed the assessment u/s.153A r.w.s 143(3) of the Act on 19.3.2014 determining total income of the assessee at Rs. 1,48,48,05,920/- by making two disallowances viz; first disallowance u/s.14A r.w. 8D of I.T. Rules, 1962 of Rs. 6,11,354/- and another addition on account of gross profit as reflected in the books of accounts with the rate of gross profit @ 56% of turnover of Rs. 4,94,60,415/-. Aggrieved the assessee carried the matter in appeal before the ld CIT(A). 3. Ld CIT(A) after considering the stand of the Assessing Officer and explanation and submissions of the assessee granted part relief on the issue of addition u/s.14A r.w 8D of I.T.Rules and there is no ground neither from the department nor from the assessee regarding this issue. However, on the issue of gross profit addition, ld CIT(A) granted part relief to the assessee and reduced the gross profit rate from 56% to 55%. Now, in these cross appeals, the assessee is challenging partly confirmation of addition of 1.12% of the net sales turnover (le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Commission (IT&WT), Additional Bench, Kolkata and the Settlement Commission passed order u/s.245D (4) of the Act on 28.3.2013 for assessment year 2004-05 to Assessment year 2010-2011 by estimating gross profit @ 56%. Ld CIT DR submitted that the assessee agreed to 56% of gross profit before the Settlement Commission for the said block period of 7 years and during the current assessment year i.e. A.Y. 2011-12, the assessee has shown profit @ 53.88% of total sales/turnover. Ld CIT DR again drew our attention towards para 4 of the assessment order and submitted that the assessee vide order sheet entry dated 28.2.2014 has agreed for estimation of gross profit @ 56% of total sales/turnover as computed and estimated by Settlement Commission. Therefore, the AO without making any further inquiry and going deep into the issue, estimated the profit @ 56% of total sales/turnover, which is quite correct, reasonable and justified. 7. Placing reliance on the various decisions of Hon'ble High Courts, ld CIT DR submitted that u/s.246A of the Act, any assessee agreed by any of the order passed by the Assessing Officer may file appeal to the Commissioner of Income Tax (Appeals). He further expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 4 of the assessment order, when the assessee has himself voluntarily offered 56% gross profit rate then, it was not required from the AO to do further enquiry or exercise u/s.145(3) and u/s.144 of the Act and the assessee cannot play hot and blow at the same time by challenging the partly confirmed addition by way of non-maintainable appeal. Ld CIT DR submitted that there is no whisper in the order of the first appellate authority as to why ld CIT(A) reduced the gross profit from 56% to 55% and, therefore, it has to be presumed that the reduction of gross profit by the ld CIT(A) has been done without application of mind and without considering the facts and circumstances of the case without any cogent, justified and reasonable cause as noted in para 4 of the assessment order by the AO. Ld CIT DR lastly contended that there is no logic to reduce G.P. from 56% to 55% without any basis by partly allowing non-maintainable appeal, thus, ld CIT(A) is not competent and eligible to grant any relief to the assessee. Therefore, the order of the ld CIT(A) may kindly be set aside by restoring that of the order of the Assessing Officer. 10. Placing rejoinder to above submission, ld A.R. s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r various decisions as relied by ld CIT DR, including the decision of Hon'ble Kerala High Court in the case of Vamadevan Bhanu,(supra), the appeal of the assessee is not maintainable if assessment has been made on agreed basis. Similar view has been expressed by Hon'ble High Court in the case of Ramesh chandra and Company (supra) in the case of Banta Singh Kartar Singh (supra) and in the case of Ramanlal Kamdar(supra). 13. Now the legal position vivid from the provisions of section 246A of the Act alongwith the proposition laid down by various High Courts, as respectfully noted above, it is clear that when the assessee, during the assessment proceedings, has agreed to a particular addition, then he cannot be held aggrieved by such addition or disallowance, enabling him to file appeal before the ld CIT(A) u/s.250 of the Act. Keeping in view of above legal position and proposition laid down by Hon'ble High Courts (supra), when we analyze the impugned addition made by the AO, then from para 4 of the assessment order, we find that the AO has made addition with the following observations: " Estimation of gross profit @ 56% Previous to the current search & seizure, one more search was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ata is not applicable to income tax proceedings, therefore, the order of Settlement Commission cannot be accepted but there is no whisper in the written submission that the assessee was not agreed to estimated addition @ 56% of sales/turnover by the AO. Similarly, from the Form No.36 filed before the Tribunal, the assessee has not taken any ground that the assessee during assessment proceedings before the AO never agreed to estimate of gross profit @ 56% in the line of order of Settlement Commission from A.Y. 2004-05 to 2010- 2011. Thus, we safely presume that the assessee neither before the ld CIT(A) nor before this Tribunal alleged or agitated the issue of estimate of gross profit @ 56% of sales/turnover by stating that the assessee was never agreed to such addition before the AO. 16. Before we reach to a logical conclusion, we find it appropriate to reproduce the relevant paras of the ld CIT(A) order at pages 11 to 12 as follows: ....... " r) There is therefore, every possibility that the Department and society are absorbing risks and incurring higher costs of collection created by the ambiguity surrounding the affairs of the Appellant. The Appellant is liable and duty b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in the case of New Jehangir Vakil Mills Co. Ltd. vs CIT, (1963) 49 ITR 137 was also cited which observed that the extent to which a decision given by an Income-tax Officer for one assessment year u) In both the connections above, it is held by this office that the GPM reported by the Appellant for the impugned F.Y. 2010-11 of 53.88% has not been ignored and has rather been adopted as the basis for the computations of income in this order. The only difference is that due allowance has been given for statistical variations generated as a result of business dynamics, accounting practices, et al for which the figure adopted by the ITSC has been considered. v) It is also not inconceivable when seen that what is being analyzed is the running of a large conglomerate, the figure arrived at by the ITSC factors in a reasonable variation (standard deviation). Considering all the facts and circumstances of this case, the said variation is estimated to be 1%, following which the GPM to be adopted is computed at 55%. This amounts to a "vote-of-confidence" of 1.12% (55% less 53.88%) in the accounts and affairs of the Appellant. This is analogous but not equivalent to a 98.88% Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld CIT (A) also observed that the said variation is estimated to be 1%, following which the GPM to be adopted is computed at 55% and this amounts to a "vote-ofconfidence" of 1.12% in the accounts and affairs of the Appellant. Ld CIT(A) observed that this is analogous but not equivalent to a 98.88% Confidence Interval around the real mean founded in the subject of Statistics. The "premium" of 1.12% can also be considered to be the recompense to the Government in absorbing the risks and incurring higher costs of collection created by the ambiguity surrounding the affairs of the Appellant created through sampling in the audit of accounts and business dynamics. With these hypothetical observations, without any factual matrix and only based on surmises and conjunctures, ld CIT(A) reduced the gross profit margin from 56% to 55% granting part relief to the assessee. 19. As we have already noted above that from 4 of the assessment order (supra in para 12 of this order), it is clear that in the line of ITSC order for preceding assessment years 2004-05 to 2010-2011, the assessee, before the AO during the assessment proceedings, agreed to estimation of gross profit @ 56% of sales/turnover an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and the AO did not make any addition on the agreement or consent of assessee. But in the case in hand, the assessee during assessment proceedings before the AO, voluntarily agreed to the estimation of G.P. @ 56% of sales/turnover and impliedly stopped the AO from making any further enquiry or going deep into the issue referring to the books of account of assessee. Thus, facts and circumstances of the present case are quite dissimilar and distinct from the case of Shri G.T.Umesh (supra). Therefore, we are of the humble opinion that the benefit of the ratio of the order of ITAT Bangalore in the case of Shri G.T.Umesh (supra) is not applicable to the present case in hand. 21. Now, we find it appropriate to adjudicate the grievance of the assessee raised by way of cross appeal in ITA No.01/CTK/2015. Ld A.R. of the assessee challenging the part confirmation of addition by the ld CIT(A) submitted that the ld CIT(A) has erred in estimating the GPM @ 55% of sales/turnover and thereby confirming the addition to the extent of Rs. 2,61,93,484/- out of total addition of Rs. 4,94,60,515/- made by the AO in estimating the GP @ 56% of the sales/turnover without finding any defect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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