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TMI Blog2022 (9) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case and in law, Ld. CIT(A)-13, Kolkata is erred in allowing the relief of the assessee amounting to Rs. 64,75,797/- without appreciating the facts that the assessee has lowered GP rate by showing inflated expenditure and lower income from job charged in its Jamshedpur Branch (Unit-1). ii) Whether on the facts and circumstances of the case and in law, Ld. CIT(A)-13, Kolkata is erred in allowing relief to the assessee amounting to Rs. 1,37,03,318/- without appreciating the facts that the assessee has shown lower NP rate by adopting inaccurate statement in stock of related to scrap transactions. iii) Whether on the facts and circumstances of the case and in law, Ld. CIT(A)-13, Kolkata is erred in allowing relief to the assessee amounting to Rs. 7,36,353/- without appreciating the facts that the assessee has shown lower NP rate in Pune Branch by adopting different method of valuation on scrap transaction. iv) The appellant craves leave to add, amend, alter, vary and or withdraw any or all of the above grounds of appeal. 4. Issue raised in ground no. 1 is against the deletion of addition of Rs. 64,75,797/- by Ld. CIT(A) as made by the AO in respect of Jamshedpur B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s done for TELCO ancillaries in firm unit. The Second unit at Jamshedpur manufactures M.S Ingots. Durgapur unit does Billet cutting for Alloys Steel Plant, Durgapur. The Pune Branch, the business of the appellant consists of Trading in Iron and Steel Scraps. The appellant firm filed return of income declaring income of Rs. 19,61,440/- on 30.09.2011. 5.2. Ground of appeal Nos. 01 to 05 pertains to the contention of the appellant that the Books of account of the appellant firm were rejected on the basis of surmises and conjecture and the AO has erred in rejecting Books of Accounts without finding out discrepancies. The Grounds of Appeals No. 01 to 05 are being taken together in conjunction with Ground of Appeal Nos. 06,07, & 08. 5.3. Ground of Appeal No. 06 pertains to the addition of Rs. 64,75,797/- made by the AO on account of applying GP rate of 62.546% as per the last assessment year on account of unreasonable cost of material consumed and lower job charges as per unit consumption of electricity. The AO vide his office letter dated 26.09.2013 asked the appellant to give explanation as to why the accounts be not rejected and Gross Profit be not determined @ 62.54% of last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that if this apparent mistake is rectified, the GP rate works out to 44% as compared to 62.55% in the last AY. 5.3.2. I have carefully gone through the Assessment order, the observations of the AO and the arguments & contentions of the appellant. It is seen that there was no overstatement of expenses on power and Fuel or any understatement of the profits in the two units as a whole. The appellant has also contended that large scale rate-cutting employed by Tata Motors and TISCO and rejections were responsible for the fall in GP in Unit-I from 62.55 to 44% . The AO has not doubted the genuineness of purchases of purchases and not pointed out any specific defects. In the case of St. Teresa Oil Mills vs. State of Kerala (1960) 76 ITR 365, it was held that the account regularly maintained in the course of business have to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable. The Department has to prove satisfactorily that the account books are unreliable, incorrect or incomplete before it can reject the accounts, which may be done by showing that important purchases are omitted therefrom or proper particulars or voucher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GP ratio, in the absence of any cogent reasons could not be a ground to hold that the proper income could not be deducted from the Audited Accounts. In view of the above mentioned facts of the case, various case laws as discussed, it is observed that the AO was not justified in rejecting the Books of Accounts of Unit-I and applying GP rate of 62.54%. Therefore the addition of Rs. 64,95,197/- is being deleted and the Ground of Appeal No. 06 is allowed." 7. After hearing rival parties and perusing the material on record including the impugned appellate order, the undisputed facts gathered from the records are that the assessee has its head office at Kolkata , two units were at Jamshedpur and one at Pune .We note that the assessee is engaged in the business of trading and supplying Iron Scraps (M.S) to Tata Motors through Head office at Kolkata. The AO has made addition of Rs. 64,75,797/- in respect of Jamshedpur Unit-1. The assessee has been doing job-work processing like decoiling, straightening and cutting of M.S coils for TELCO ancillaries at Jamshedpur unit-1 and the second unit at Jamshedpur was doing manufacturing of M.S. Ingots by using sponge iron and M.S. Scraps. The AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent ferrous contents, profit thereof and correct value of stock etc. The AO has noted at page no. 5 that there were unverified sales to the extent of 704.330 M.T amounting to Rs. 1,37,03,318/- to unregistered parties which were not be identifiable. Finally the books of accounts were rejected on the ground that the assessee has not maintained stock records mentioning quantity of material purchased and sold to the various parties with quality and contents and substituted the NP of Pune Branch for the Kolkata head quarter which are having different customers, geographical and market conditions and made an addition of Rs. 1,42,16,610/- . 10. In the appellate proceedings, the Ld. CIT(A) deleted the addition by observing the holding as under: 5.4. Ground of Appeal no. 07 pertains to the addition of Rs. 1,42,16,610/- made by the AO by applying net profit rate @ 5.8% of the turnover of the head office and ground of appeal no. 08 pertains to the addition of Rs. 7,36,653/- made by the AO on account of estimated Net Profit @ 6% at Pune Unit. In respect of Ground of Appeal No. 07, during the course of Appellate proceedings, the AO in absence of any proper account of quantity and amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has not found any discrepancy in purchases and sales. The AO has not called for the accounts of the appellant with the Tata Motors . There is also no finding that the purchases were bogus: In CIT vs. Amitbhai Gunwantbhai (1981) 129 ITR 573, 580 (Guj), the Hon'ble Gujarat High Court held that the basic principle is the same in the law relating to income tax as well as in civil law, namely, if there is no challenge to the transaction represented by the entries or to the genuineness of the entries, then it is not open to the revenue or other side to contend that what is shown by the entries is not the real estate of affairs. When it is not established by the AO that sales are suppressed or any item of purchase is inflated, no gainful purpose is served because value of closing stock will have direct bearing on opening stock (thereby the profits) of next year thereby proportionately adjusting the next year's profit. In the number of legal pronouncements it has been held that merely because stock register is not maintained, books of accounts cannot be rejected. Reference in this regard may be made to the judgments in the case of Ashoke Refractories Pvt. Ltd. vs. CIT (2005) 279 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted." 11. We have perused the material on record and heard the rival contentions. We find that the AO has applied net profit @5.8% to the turnover of the head office thereby making an addition of Rs. 1,42,16,610/- on the ground that the assessee has not maintained quantitative/qualitative details of stocks and also that unverifiable sales of 704.330 M.T amounting to Rs. 1,37,03,318/- to parties which were not identifiable. We note that while deleting the addition the ld CIT(A) recorded a finding a fact that the AO has not found any discrepancy/defects in the books of accounts and observed that the sales and purchases were made in cash. The Ld. CIT(A) also noted that there were no finding of the AO as to the fact that the sales were bogus and non genuine . The Ld. CIT(A) has noted that the similarly in respect of Pune Branch which was dealing in iron and steel scrap with local companies whereas head office was engaged in dealing with trading in Iron scrap purchased from third parties and selling it to Tata Motors, Jamshedpur and thus rejected the observations of the AO that the assessee has not mentioned the job and scrap thereof and also the application of NP of 6% in the Pune Br ..... X X X X Extracts X X X X X X X X Extracts X X X X
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