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TMI Blog2021 (3) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... cardamom where the prices have reduced by almost half the rate at the end of the year as compared to beginning of the year. Therefore, we find that there is no rational basis for estimating the gross profit rate by the AO even where the books of accounts are rejected. In fact, in the remand report submitted to the ld CIT(A), the AO has admitted that there is no specific reason mentioned in the assessment order to estimate the gross profit rate of 0.69% as against declared gross profit rate of 0.38%. Further, the AO has acknowledged the fact that turnover has increased substantially during the year and the trading results are duly supported with documentary evidences. Regarding commodity and cardamom trading losses CIT(A) has also recorded a finding that these are speculative losses and are not part of trading account of the assessee and thus, doesn t effect the trading results so declared by the assessee. In the results, the trading additions so made by the AO and confirmed by the ld CIT(A) is hereby directed to be deleted. - ITA. No. 351/JP/2019 - - - Dated:- 1-3-2021 - SHRI SANDEEP GOSAIN , JM And SHRI VIKRAM SINGH YADAV , AM Assessee by : Shri Nikhilesh Kataria (CA) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e gross profit of ₹ 1,08,57,480/-. The assessee declared gross profit of ₹ 59,01,264/- and as such an addition of ₹ 49,56,217/- was made to the total income of the assessee. In the first appeal, the assessee submitted complete documents and records before the ld. CIT(A) and the same were accepted as additional evidence. In remand proceedings, the ld. AO has accepted the trading results of the assessee but the ld. CIT(A) rejected the remand report and went on to sustain the original trading addition. Now the assessee has filed this appeal. 4. In the aforesaid factual background, the ld. AR submitted that there has been a valid and bonafide reason for non appearance before the AO in assessment proceedings. A detailed explanation has been made before the ld. CIT(A) as well as before the AO in remand proceedings and the ld. CIT(A) has duly accepted the reasons and admitted all the additional evidences submitted by the assessee. The relevant para of ld. CIT(A) at page 8 para (iii) reads as under:- iii) During the appellate proceedings, the appellant has filed a number of documents as additional evidences under rule 46A of the IT Rules, which were forwarded to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of gross receipt whereas, the assessee has shown G.P. rate of 0.38 %. The sale of assessee has substantially increased during the year and hence not comparable. However, the trading results of the assessee are duly supported with documentary evidences as discussed above. Commodity trading loss and Cardamom trading loss are also fully supported with documentary proofs and the same were accepted in the original assessment proceedings also and hence require no interference. 6. It was submitted that the ld. CIT(A) in an incorrect and unjustified manner has rejected the remand report: The ld. CIT(A) dealt with the remand report of the AO at clause (v) at page 12. The same reads as under:- v) In its remand report, the AO has accepted the submissions of the appellant as made during the remand proceedings. However, it appears that the AO has not examined the matter in the correct perspective and the documents filed by the appellant as additional evidences were not analyzed properly and thus, the remand report of the AO is to be ignored and no cognizance could be given to it. Therefore, in view of the totality of facts and circumstances of the case, it is held that the AO was jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er submitted that the ld. CIT(A) put himself in the shoes of the AO by rejecting his remand report and in these circumstances, it was incumbent upon him to make further enquiry if it was of the view that the remand report of the AO was deficient. But the ld. CIT(A) has not made a single independent enquiry even though it has summarily rejected the remand report of the AO. 12. It was submitted that as already pointed out that there was absolutely nothing with the ld. CIT(A) to suggest that there remained any discrepancy in the trading results disclosed by the assessee which was fully supported with the documentary evidences on record and in contrast, the remand report of the AO was fully supported with reasons and basis as would appear from the remand report. Therefore, in these circumstances, a summary rejection of the remand report was uncalled for. In these facts and circumstances, the ld. CIT(A) was completely unjustified in rejecting the remand report submitted by the ld. AO and hence, trading addition has to be completely deleted while accepting the remand report submitted by the ld. AO. 13. It was further submitted that the assessee has maintained complete books of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.04.2011 ₹ 1106.54 (Opening balance rate) 01.07.2011 ₹ 630/- 31.03.2012 ₹ 553.02 (closing balance rate) Thus there has been consistent fall in the prices of the cardamom which has significantly contributed to the fall in overall G.P. rate and in fact the entire stock of the assessee came at half of the prices as at the start of the year the rate of cardamom was ₹ 1106 per qtls. which became ₹ 553 at the end of the year. This itself clearly explains the fall in G.P. rate and in any case, the complete books of accounts are fully supported with bills, vouchers and evidences. 16. It was further submitted assessee has maintained the complete day to day quantitative details of all the goods traded by it. Even the quantitative details are part of the audited financial statements and the same is appearing at PB 30. Complete details including sales and purchases ledger, bills and vouchers submitted. We may also submit that the assessee has submitted the complete evidences in support of its trading results. Some of such evidences are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 21,83,559. In this regard, it was submitted that the ld. CIT(A) has duly accepted the transaction as would appear from the following para of the CIT(A) order at page 16 of its order xiii) In view of the above discussion, it is crystal clear that the loss amounting to ₹ 15,13,132/- and ₹ 21,83,559/- claimed by the appellant on account of commodity trading loss and cardamom square off trade loss respectively in its profit and loss account is nothing but a speculative loss, which cannot be allowed to be set off against non-speculative income. Even, the appellant has failed to prove the genuineness of such losses. It is clear from the above that the ld. CIT(A) was fully satisfied with the genuineness of the transaction itself though it was stated to be speculation loss. In any case there is no evidence otherwise on record for not accepting such loss claimed by the assessee. Therefore, there is no reason to take any adverse inference on the trading results of the assessee for the reason of these losses. 20. It was also submitted that these losses are not part of the trading results as would appear from the perusal of the audited trading account of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the assessment order was passed u/s 144 of the Act, since no compliance was made by the appellant, during the assessment proceedings, before the AO, on account of change of its earlier address and in the interest of natural justice. The AO has submitted its remand report as under: Remand report In this connection, it is submitted that an assessment order was passed on 30.03.2015 in the case of Sh. Sanjay Agarwal, D-1, Ilnd Floor, Chandpole Anal Mandi, Jaipur, for A.Y. 2012-13 u/s 144 of the I.T. Act, 1961 The following additions were made in the assessment order:- 1 Addition was made of ₹ 49,56,217/ on account of trading addition by taking G.P. at the rate of 0.69% on gross receipt of ₹ 1,57,35,47,863/- while, the assessee has already shown G.P at the rate of 0.38% on gross receipt, which comes to ₹ 59,01,264/-. Penalty proceedings u/s 271(1)(c) was initiated by the A.O. During the appellate proceedings, the assessee has claimed as under:- I, Sanjay Agarwal S/o Shri Nirmal Agarwal aged 45 years, resident of D-1, lind Floor, Chandpole Anaj Mandi, Jaipur do hereby solemnly is as under. That, the trading addition of ₹ 49,56,217 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned in the assessment order to take the rate of G.P. at 0.69% of gross receipt whereas, the assessee has shown G.P. rate of 0.38%. The sale of assessee has substantially increased during the year and hence not comparable. However, the trading results of the assessee are duly supported with documentary evidences as discussed above. Commodity trading loss and Cardamom trading loss are also fully supported with documentary proofs and the same were accepted in the original assessment proceedings also and hence require no interference. (iv) I have duly considered the submissions of the appellant, assessment order, remand report of the AO and the material placed on record. It is an admitted fact that no compliance was made by the appellant before the AO during the assessment proceedings and thus there is no question of verification of trading account of the appellant. In fact, during the appellate proceedings, it was submitted by the appellant that its books of accounts for the year under consideration have been misplaced, therefore, the trading results of the appellant could not be verified, even during the appellate proceedings. (v) In its remand report, the AO has accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account, no other document was filed relating to purchase and sale of 6000 (1000+ 5000) Kgs. of cardamom. It is noted that the appellant has also claimed a loss of ₹ 6,75,384/-from Guhan Traders but no documentary evidence was filed by it. It may be mentioned that this amount of ₹ 6,75,384/- is a part of loss of ₹ 21,83,559/- on account of cardamom square off trade. (viii) Regarding the loss of ₹ 15,13,132/-, the appellant has filed copies of a certificate from S. Sanasiraj and credit note and debit note thereof. It is noted from the debit note issued by S. Sanasiraj that 5000 Kgs. of cardamom were purchased on 07.04.20111 for a sum of ₹ 54,50,000/-. It may be mentioned that in the said debit note, it was stated that 'the above cardamom have been stocked with us at your risk. VAT/ CST will be paid by you at the time of delivery'. Further, it is noted from the credit note issued by S. Sanasiraj that 5000 Kgs. of cardamom was sold / square off for a sum of ₹ 39,37,500/-. (ix) In view of these facts, vide order sheet entry dated 26.07.2017, the appellant was required to furnish the following information: Bills in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the goods to the assessee and it was only the case where these agents purchased goods on our behalf, stocked them and thereafter sold the goods on instruction of the assessee. Transporting of goods in other states to the place of the assessee would have been very costly and as such the goods were kept with these agents only. 1.4 Sale Purchases Made by Agent Not Required to be Part of Turnover: We may also submit that as the transactions have been booked on net basis the same were not required to be added in the respective amounts of sales and purchases. It is further submitted that as the agent of the assessee made these sales and purchases, whatever liability was there in this regard is discharged by those parties only and the assessee is nothing to do with the same. Having added the respective amount in the sales and purchases account of the assessee would not have made any difference. 1.5 Very Common Business Practice: We may submit that this is a very common business practice in the commodity business where purchases and sales are made by the agents on behalf of the traders and the difference are settled if ultimately the person is unable to lift the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in making trading addition of ₹ 49,56,217/- to the income of the appellant. It is clarified here that no separate addition is required to be made on account of above discussed loss of ₹ 36,96,691/- (21,83,559 + 15,13,132), claimed by the appellant in its profit and loss account, as this amount is being considered to be covered under the trading addition of ₹ 49,56,217/- made by the AO. 23. We have heard the rival contentions and perused the material available on record. In this case, the AO has rejected the books of accounts and has estimated G.P. rate of 0.69% on declared turnover as against G.P rate of 0.38% declared by the assessee and made a trading addition of ₹ 49,56,217/- in the hands of the assessee. The AO has stated that when the books of accounts are rejected, it is duty of the AO to deduce true and fair income of the assessee and it is open to him to take a higher percentage consistent with the state of trade in the locality or with any special circumstances of the assessee which warrants higher rate of profits. Thereafter, he has referred to the discrepancies noticed in the books of accounts and stated that the assessee has failed to gi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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