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TMI Blog2021 (11) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... The case relied by the assessee in the case of M/s. Goodcare Pharma Pvt. Ltd. [ 2019 (4) TMI 566 - ITAT KOLKATA] is also not be of any benefit to assessee since the fact are not similar and more specifically the issue of rejection of book results was not before the coordinate bench of Kolkata in the case of M/s. Goodcare Pharma Pvt. Ltd. (supra) and, therefore, it shall not be applicable on the instant issue raised before us. Under the given facts and circumstances of the case and detailed enquiry conducted by the Ld. CIT(A), which remained uncontroverted by the ld. counsel for the assessee find no reason to interfere in the finding of Ld. CIT(A) applying the gross profit rate of 40% on the turnover disclosed by the assessee as against the gross profit rate of 57.01% disclosed by the assessee and accordingly has rightly charged the difference of the profit that is 17.01% (57.01% less 40%) on the gross turnover for the year as Income from other sources . Accordingly, ground no. 2, 3 4 raised by the assessee are dismissed. Appeal of the assessee for A.Y. 2013-14 is dismissed. Conditional allowing section 80IC taking 40% G.P. Rate - HELD THAT:- As decided in own case we co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case selected for scrutiny through CASS followed by serving of notices u/s 143(3) and 142(1) of the Act. 5. During the course of assessment proceedings, the Ld. AO examined various details received from the assessee. The Ld. AO noted various anomalies in the financial transactions specially the genuineness of sales and transportation cost and also the purchases from related parties could not be verified. Ld. AO came to a conclusion that the profits shown by the assessee firm are not genuine and are fabricated and transactions are colourable. Ld. AO, accordingly, denied the deduction u/s 80IC of the Act and along with the other minor additions assessed the income at ₹ 17,22,89,990/- in the following manner: Profit disclosed as per P L a/c treated as income from undisclosed sources₹ 14,48,09,592/- (A) Add: As discussed above U/s. 43B (A) Add: As discussed above U/s. 43B 1. Central Excise duty payable ₹ 50,01,653/- 2. Sales tax payable ₹ 1,29,59,303/- 3. Service Tax payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentative submitted that the assessee has not raised any ground challenging the finding of the Ld. CIT(A) rejecting the books of account u/s 145(3) of the Act. Various discrepancies have been noticed in the financials of the assessee-firm. Books of accounts were not produced before the Ld. CIT(A) as well as the Assessing Officer. Documents to substantiate the genuineness of purchase, sales and transportation expenses were not filed. The Ld. CIT, DR heavily relied on the finding of the Ld. CIT(A). 10. We have heard rival contentions and also perused the record placed before us and carefully gone through the decision relied by the Ld. CIT(A). Though the assessee has raised five grounds of appeal, ground no. 1 and ground no. 5 are general in nature and the effective sole issue lies in ground no. 2, 3 and 4, that the Ld. CIT(A) erred in estimating the profits eligible for deduction u/s 80IC of the Act by applying a gross profit rate of 40% as against the gross profit 57.01% disclosed by the assessee and further erred in taxing the difference amount as Income from other sources . 11. We observe that the assessee has been consistently claiming deduction u/s 80IC of the Act and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of purchase and sales recorded in its books. 23. The ld. AR has also stated that one of the factors contributing to the high rate of GP% is Transport Subsidy that the appellant receives from the Government. In a tabular presentation, he has furnished the details of GP and NP% calculated with and without transport subsidy. GP NP percentage of With Transport Subsidy A.Y Sales Transport Subsidy Total Turnover Gross Profit Net Profit GP% NP% 07-08 77,81,891.00 - 77,81,891.00 23,52,745.00 23,36,681.00 30.22 30.03% 08-09 28,73,51,526.00 - 28,73,51,526.00 7,96,25,304.00 16,19,99,108.00 27071 56.38% 09-10 30,67,34,647.65 - 30,67,34,647.65 13,49,56,925.65 13,21,62,967.00 44.00 43.09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01,68,84,575.00 75.31 16.24% 11-12 24,84,97,517.00 - 24,84,97,517.00 18,22,59,130.00 03,95,79,001.00 73.34 15.93% 12-13 25,26,11,624.40 - 25,26,11,624.40 20,53,22,876.40 05,44,70,076.00 81.28 21.56% 13-14 23,59,39,128.00 - 23,59,39,128.00 19,35,62,916.00 03,64,21,320.00 82.04 15.44% 14-15 20,72,79,540.00 - 20,72,79,540.00 16,50,83,684.00 43,47,556.00 79.64% 02.10% 15-16 11,37,75,876.00 - 11,37,75,876.00 09,08,51,661.00 53,42,228.00 79.85% 04.70% 24. The appellant has stressed the fact that the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also is the same, i.e. in Punjab, Haryana and Rajasthan. The management too is the same. Therefore, the GP and NP declared by the appellant do not appear to be reliable. 26. The actual existing market rates for sale of finished products are not available in the submissions of the ld. AR. There also is no clarification regarding the quality and content of moisture, carbon, ash, sulphur, volatile matter, particle size, etc. In the finished coke produced by the appellant. Without these, a proper examination and comparison of the prices stated by the appellant are not possible. Therefore, the above explanation does not generate confidence about its authenticity. 27. The issues gets further confounded by the fact that almost entire sales have been made by the appellant in cash. The details of the purchasers (to whom the appellant sold the finished products) are very sketchy sans any exact identification. There is no explanation of how was such huge cash received by the appellant. In the paragraph from the assessment order quoted above, the ld. AO has highlighted the defects in the appellant s claims, so far as cash sales are concerned (as discussed in para 13 above). During the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the fact that the appellant s claims regarding high GP and NP does not hold good in view of the lacunae pointed out therein. An analysis of the GP and NP percentages, the production cost and the sales from the FY 2010-11 onwards to FY 2014-15 lead to the following observations: PARTICULARS FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 SALES (+) TRANSPORT SUBSIDIES (+) INCREASE/DECREASE IN CLOSING STOCK 35,01,78,089 35,60,80,133 34,66,14,439 31,50,87,890 17,44,79,331 RAW MATERIAL 16,27,36,345 14,48,69,760 14,49,23,520 14,49,63,840 08,02,85,440 MANUFACTURING EXP 28,58,121 38,42,139 40,82,853 56,97,460 21,43,849 TOTAL EXPENSES 16,55,94,466 14,87,11,899 14,90,06,373 15,06,61,300 08,24,29,289 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,609 01,260 - 16,580 01,42,949 01,16,109 02,25,276 02,53,236 02,53,242 29.2 The figures for wages appear to be abysmally low. In order to verify it, the website for the department of labour, Government of Assam was referred. The website of Govt. of Assam gives the details of basic minimum daily wages for skilled, semi-skilled and unskilled workers as ₹ 227, ₹ 175 and ₹ 169 respectively. Since there is no detail of number of workers employed by the appellant or the number of skilled, semi-skilled and unskilled workers, the average daily pay of the three categories of workers is taken at ₹ 190. 29.3 During the FY 2010-11 the total wages paid was Rs. ₹ 5,91,825. It was orally stated by the Id. AR that the factory works for 8 months in a year and during the monsoons, it remains closed. For an estimated calculation, therefore, we may take the number of days when the factory was operational as 30 days X 8 months = 240 days. Hence, the appellant has paid ₹ 2,466 per day towards labo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be the only discrepancy in the statement of expenses. The overall manufacturing expenses as percentage of raw material consumed is poorly low and this has also been indicated above. 29.10 Another discrepancy is noted, but it pertains to the AY 2014-15 and not to the AY under reference in this appeal. I find it necessary to be highlighted so that an overall picture of the way the appellant s profits are declared, comes out clearly. The quantity of Raw Material consumed in FY 2014-15 is stated to be 791. 25 MT but the production of BH Coke is 31,547 MT. During the FY 3013-14, raw material consumption was at 1,03,545 MT and the finished product was 56,950 MT. In other words, while the production was 55% of material consumed, it was 3,987% of raw material consumed in FY 2014-15, if the production schedule annexed to the audit report is anything to go by. 30. Further, the Burning losses recorded by the appellant are roughly around 45%. As stated earlier in this order, there is no detail about the quality of coal and its content. As such for a better appreciation of facts, certain very general aspects of conversion of coal into BH Coke need to be considered. The coal found in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d view, the GP% should be taken at 40% and based on the resultant figure, the remaining part of the profit and loss should also be considered before calculating the net profit. The ld. AO is directed to compute the eligible net income for exemption u/s 80IC by taking the GP at 40% and taking into account the items in profit and loss account. The balance amount should be brought to tax as income from other sources . These grounds of appeal are, therefore, partly allowed. For estimating the GP at 40%, the burning losses is taken at 55% and the yield is estimated at 45%. The miniscule amount of expenses is also considered for estimation and so are the unsubstantiated cash sales. As an overall view of the financial transactions, in my view estimating the GP at 40% is reasonable. The claim of transport subsidy is held to be eligible for deduction u/s 80IC(10) in view of the decision of the Hon ble Calcutta High Court in the case of ITO vs SKJ Coke Industries Ltd. and also on the decision of the Hon ble Supreme Court in the case of Ponny Sugars Mills (Erode) Ltd. wherein it was held that transport charges and subsidy was includable in business profits eligible for deduction u/s 80IC ..... X X X X Extracts X X X X X X X X Extracts X X X X
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