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TMI Blog2024 (12) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... ount and proceeded to make the net profit addition by arriving at the average NP of 4% and made the addition of the difference of 4% of the profit declared by the assessee. Assessee is a unit claiming exemption u/s 80IB of the Act. On careful consideration, we observed that even if we consider the findings of the Assessing Officer to be correct, still the assessee is a unit claiming exemption u/s 80IB and any addition in NP will give rise to the exemption u/s 80IB of the Act since there was no other business carried on by the assessee and also Assessing Officer has not brought on record any other activity made by the assessee. In that aspect also, the claim of the assessee can be allowed. - Shri S. Rifaur Rahman, Accountant Member And Shri Sudhir Pareek, Judicial Member For the Assessee : Shri Deepak Singh, Advocate For the Revenue : Shri Javed Akhtar, CIT-DR ORDER PER S. RIFAUR RAHMAN, AM: 1. This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals)-4, Kanpur [hereinafter referred to Ld. CIT (A) ] dated 25.01.2023 for Assessment Year 2017-18. 2. Brief facts of the case are, assessee filed its return of income declaring total income of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer proceeded to arrive at the average GP and NP at 8.46% and 4.34% respectively and accordingly he proceeded to make the addition of difference of the same and compared the same with the previous assessment years. He further observed that the profit declared by the assessee in AY 2013-14 seems to be reasonable. Since assessee has not submitted relevant information and no complete details with supporting documentary evidences were filed, accordingly he rejected the books of account u/s 145 of the Act and observed that NP of 4% is applied in this year which would be fair and justified in the interest of natural justice. Accordingly, he made the addition of NP 2.28% of the total sales (4% minus 1.72%) and made addition of Rs. 23,47,88,621/-. Further he observed that assessee has made cash payment of Rs. 12,04,40,188/- to various suppliers of buffalo meat against the provisions of section 40A(3) of the Act and no complete addresses, their PAN and confirmation was filed. With the above observation, he proceeded to make the addition of NP. 4. Aggrieved with the above order, assessee preferred an appeal before the ld. CIT(A), Kanpur-4. Assessee has filed grounds of appeal and also filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further after the search proceedings in case of the appellant, the assessments have been done but books have never been rejected. It is also a fact that in the year under consideration, the appellant is eligible for claim of deduction of 100% of profit and gains in the eligible business in accordance to provisions of section 80IB of IT Act, hence there appears to be no reason of suppression of profits of the eligible business It has been found that the appellant has shown NP rate of 2.35% in immediately preceding year i.e. AY 2016-17 and the same was also accepted by the ld. AO in the search assessment proceedings However this year i.e in AY 2017-18 NP rate is 1.72% and thus there is fall of 0.63%. The appellant attributes this fall to fall In duty drawback of 0 20% and to S. Tax refund of 0.27% (in AY 2016-17 duty drawback was 0.84% and in AY 2017-18 the same was 0.64% and in case of S. Tax refund, these figures were 0.35% and 008%) Thus the difference of 0.47% is explained. Further in the matter of balance difference of 0.16% in NP figures of AY 2016-17 2017-18, Ld AR submits that primary reason for fall in NP from 2.35% to 1.72% is fall in export turnover from 71.24% in AY 16-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in law. the Ld. CIT(A) has erred in deleting the addition of Rs. 22.45,07,521/- out of total addition of Rs. 23,47,88,621/- on account of enhancement of N.P. rate without considering the facts following facts:- (i) The Ld. CIT(A) has failed to consider the fact as elaborated in the assessment order that in spite of sufficient opportunities provided to the assessee, the assessee failed to furnish complete details, PAN, address etc. of the persons from whom raw material was purchased. Therefore, genuineness or purchases could not be established. (ii) The CIT (A) has observed that the assessee had shown NP rate of 2.35% in immediately preceding year i.e. A.Y. 2016-17 and the same was also accepted by the AO in the search assessment proceedings. With this observation, he has opined that this year i.e. in A.Y. 2017-18 NP rate is 1.72% and thus there is fall of 0.63% as compared to NP rate declared for A.Y. 2016-17. This observation of the ld. CIT (A) is not acceptable as the Ld. CIT (A) has ignored the fact that each assessment year is separate and distinct in itself and therefore, the observation that no action for earlier year on the same issue was taken is totally unjustified. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and also not providing the address of such persons. It is humbly submitted that all the reasons given by Ld. A.O. are factually wrong and untenable. NP Rate (3) That the account book results were not disturbed in earlier years, they were accepted in toto. Search and seizure operations were conducted on the appellant and assessments for A.Y. 2013-14 to 2016-17 were made u/s 153A/143(3) of the I.T.Act. (Copies attached pages 33 to 56) No addition or disallowance was made even after conducting searches and thorough investigation during assessment proceedings. The constant decline in N.P. was also accepted and account books were also accepted in toto for all these years. There was only one technical addition u/s 80IB regarding calculation of eligible profit, appeal against which was filed before honourable ITAT, which allowed the calculation of eligible profits for deduction u/s 80IB as claimed by the appellant. If even after search and thorough investigation during assessment proceedings in immediately preceding four years the sales, purchases, expenses, account books were found in order and the facts and circumstances are identical in the present year then there is no reason or cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,281,151,291 (5) Main reason for fall in NP rate is the declining export income. Margins in export income are higher than the domestic sales. Export sales have declined continuously over last few years which has resulted in fall of GP rate and NP rate. Export turnover in A.Y. 2015- 16 was 78.24% of the total turnover in A.Y. 2016-17 was 71.24% of the total turnover and in A.Y. 2017-18 was 65.53% of the total turnover. hence there was a drastic fall in export income from 78.24% to 65.53% of the total turnover. This was the main reason for fall in GP and NP rates. Perusal of other operational incomes reveals that there is a substantial reduction of income under the head duty drawback which has also contributed to the fall in NP rate. Duty drawback in A.Y. 2015-16 was 1.13 % of total turnover, in A.Y. 2016-17 was 0.84 % of turnover and in A.Y.2017- 18 was 0.64 % of turnover. This reduction also resulted in decline of the NP rate. Moreover, (6) certain expenses have increased drastically over the years including bank interest which was in A.Y. 2015-16 0.72 % of turnover, In A.Y. 2016-17 1.19 % of turnover, in A.Y. 2017-18 1.09 % of turnover. This factor also contributed to the decline ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plying his mind. Payment for purchases of 99.67 % was through bank. Bank account is the most authentic evidence of identity of the payee, the purchase register was also produced indicating the names and addresses of the payees. The A.O. accepted the sales figures, he did not point out any specific instance of fake entry in the books, a mere presumption or surmise does not warrant rejection of books. The sales were fully verifiable as a major portion of sales is exports, even domestic sales is through bank and fully verifiable, the purchases were fully verifiable, the accounts books and vouchers were produced during the assessment proceedings then there was no scope for raising questions on the account books of the appellant. (9) That appellant finds support in the following rulings: CIT vs Simon Carves Ltd. (1976) 105 ITR212(SC) The taxing authorities exercise quasi-judicial powers and in doing so they must act in a fair and nonpartisan manner. Although it is part of their duty to ensure that no tax which is legitimately due from the assessee should remain unrecovered, they must also at the same time not act in a manner as might indicate the scales are weighted against the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e actual quantity of finished products produced by the assessee was more than what was shown in the account books. (viii) There was no finding that the assessee had made any such sale of the finished products which was not reflected in the account books. (ix) There was no finding by the Assessing Officer that the finished products were sold by the assessee at a price higher than what was declared in the account books. (x) In those circumstances, the Commissioner (Appeals) and the Tribunal were justified in holding that the Assessing Officer could not have increased the gross profit ratio merely because it was low as compared to the gross profit ratio of the preceding year. (Emphasis supplied) (xi) The revenue contended that the assessee was not maintaining the daily stock register. However, no such finding was found in the assessment order. On the other hand, the assessee had submitted before the Commissioner (Appeals) that Form No. 3CD containing all the quantitative details in respect of raw materials as well as the finished goods and duly audited by the certified accountant had been placed on record, but the Assessing Officer ignored those actual figures enclosed with the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction u/s 80 IB is directly relatable to the business income. The present year being the 5th year of starting of operations by the company hence a deduction of 100% of eligible profit is allowable. This claim is made without prejudice to above submissions regarding other additions. 8. Considered the rival submissions and material placed on record. We observed that the solitary issue raised by the Revenue is the deletion of NP by the ld. CIT (A). Assessee is in the business of meat exports and purchased the raw meat from various suppliers. From the record, we observed that assessee has purchased 99.67% through bank and only 0.33% through cash payment. The Assessing Officer observed that assessee has purchased huge meat from local vendors and he came up with a figure of Rs. 12.04 crores in cash whereas ld. CIT (A) after verification found that the actual cash payment was only Rs. 2.76 crores which is 0.33% of the total purchases. Since the assessee could not submit the above information, he proceeded to make the addition by observing GP and NP declared by the assessee during the year which is less compared to earlier assessment years i.e. from Assessment Years 2013-14 to 2016-17 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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