9911796707
TMI Blog1997 (11) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (vi) Charging of interest under sections 234A and 234B. ITA No. 753 of 1995 is the appeal by the Revenue where the following two grounds have been taken:— (i) The ld. CIT(A) has erred in law in setting aside the issue of addition of Rs. 64,44,880 made on protective basis; and (ii) Allowing a relief of Rs. 9,33,552 made on account of income for the period from 1-4-1990 to 14-5-1990 on the basis of profit declared for the remaining period i.e., 17-5-1990 to 31-3-1991. 2. Briefly the facts are that the assessee firm for assessment year under consideration has derived income from sale of brass scrap only. The return of income was filed on 31-3-1992 declaring an income of Rs. 1,25,077. In the statement of accounts annexed with the return, the Assessing Officer found that the assessee had declared a gross profit of Rs. 86,474 on total sales of Rs. 72,61,978 for the period 17-5-1990 to 31-3-1991 giving a rate of 1.19 per cent as against the GP rate of 2.54 per cent shown for the assessment year 1989-90. The Assessing Officer required the assessee to explain the reasons for the low gross profit rate in response to which it was explained on behalf of the assessee that most of the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en in the impugned order. The assessee is aggrieved and has come in appeal before us. 4. The ld. Counsel for the assessee submitted that the departmental authorities were not justified in rejecting the books of account of the assessee and resorting to the proviso to section 145(1). He furnished a comparative chart of the sales and GP shown by the assessee in the immediately preceding years as under:- Assessment Years (Rs.) 1985-86 1986-87 1988-89 1989-90 1990-91 Sales 60,04,124 61,36,768 59,31,434 1,06,17,240 1,88,98,539 Gross Profit 1,13,250 1,16,098 1,40,360 2,69,121 Not available since record burnt. Percentage of GP 1.89% 1.90% 2.3% 2.5% N.A. It was submitted that the assessee had maintained complete details of purchases and sales of scrap dealt in by the firm and the Assessing Officer had not found any defects in the accounts maintained by it. It was submitted that the purchases as well as sales were fully vouched and the assessee had given a very reasonable explanation for fall in the GP rate because the bulk of the purchases were of imported brass scrap in which the custom duty had been increased from 30 per cent to 50 per cent of the purchase value which accounted for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h J. Juneja [1995] 55 ITD 75. 6. The ld. D.R. relied on the orders of the lower authorities and further submitted that at the time of search no scrap was found whereas as per the books of account maintained for the earlier period i.e., upto 31-3-1990 and thereafter taking into consideration the purchases and sales made, the stock of scrap ought to have been 1090 kgs. And since it was not declared as such, the unescapable conclusion was that the assessee sold it outside the books of account and the departmental authorities were justified in making the addition of Rs. 84,985. As regards the application of G.P. rate, it was submitted that no doubt there was increase in the custom duty right from 30 per cent to 50 per cent, yet this alone could not account for the steep fall in the G.P. rate and as such the ld. CIT(A) was justified an applying the G.P. rate of 2.54 per cent on the declared sales as against 1.19 per cent declared by the assessee and 2.54 per cent applied by the Assessing Officer. Reliance was placed on the decision in Punjab Trading Co. Ltd. v. CIT [1964] 53 ITR 335 (Punj. & Har.), and Chhabildas Tribhuvandas Shah v. CIT [1966] 59 ITR 733 (SC). 7. We have considered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shortage of 1 per cent and by applying G.P. rate of 1.9 per cent on sales of remaining scrap at the average rate of Rs. 80 per kg. As adopted by the learned CIT(A). 9. At the time of hearing, the learned Counsel for the assessee submitted that he did not want to press for the disallowance of Rs. 5,000 out of telephone expenses. Accordingly this issue is decided against the assessee and in favour of the Revenue. 10. Ground No. 5 in the assessee's appeal and ground No. 2 in the Revenue's appeal relate to the estimate of income of the assessee for the period 1-4-1990 to 15-5-1990. As already mentioned earlier, there was search and seizure operation on the premises of the assessee on 15-5-1990 when all the records were seized and taken to the office of the ITO and subsequently destroyed in fire during Anti-Mandal agitation. The assessee started its books of account from 17-5-1990 and closed on 31-3-1991. For the period from 1-4-1990 to 15-5-1990 there were no books of account and the Assessing Officer made the addition of Rs. 9,63,184 at 1/7th of the income which was computed for the period 17-5-1990 to 31-3-1991 as against an estimated income declared by the assessee at Rs. 15,635. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he concern who manufactured the goods as per indication in the seized documents. The assessee appealed and pleaded before the learned CIT(A) that the seized papers were not allowed to be inspected by the assessee nor copies of the same were furnished. It was pleaded that the addition had been made purely on assumption and presumption and papers relied on were never confronted to the assessee. The learned CIT(A) held that the papers relied on by the Assessing Officer in making the addition could not be confronted to the assessee as the same had been destroyed in fire and were not available with the Assessing Officer. However, in the absence of such papers, the learned CIT(A) held that the Assessing Officer was duty bound to confront the assessee whatever material was in his possession with the details mentioned in the appraisal report etc. before making the addition and since proper and adequate opportunity in this regard was not allowed, he set aside the issue to the file of the Assessing Officer for fresh adjudication with the direction that the contents of the appraisal report be confronted to the assessee. He further observed and in no case, the entire sales could be the subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fails. 4. In respect of rest of the grounds in both the appeals, I do agree with the reasoning and conclusion of my learned brother. ORDER U/S 255(4) OF THE INCOME-TAX ACT, 1961 On a difference of opinion between the Members who heard these appeals, the following points of difference are referred to the Hon'ble President for the opinion of the third Member:— (1) Whether, on the facts and in the circumstances of the case, the Accountant Member is justified in adjudicating the issue of additions of Rs. 95,074 and Rs. 84,985 partly in favour of the assessee or the order of the CIT(A) sustaining these additions should be upheld as held by the Judicial Member? (2) Whether, on the facts and in the circumstances of the case the Accountant Member is justified in modifying the order of the CIT(A) in estimating the profit for the period from 1-4-1990 to 17-5-1990 or the order of the CIT(A) should be upheld as held by the Judicial Member? THIRD MEMBER ORDER 1. On a difference of opinion between the Members who heard these appeals, the following points of difference were referred to me as a Third Member by the Hon'ble President under section 255(4) of the Income-tax Act, 1961:— 1. Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso be mentioned that there were search and seizure operations in the case of the assessee on 15th May, 1990 and during the course of said operations, no stock of brass scrap was found. The Assessing Officer, however, worked out a figure of 1090 kgs. as the stock of scrap which should have been available with the assessee taking into account the purchases made in assessment year 1990-91 (wrongly stated as 1989-90 in the order of the learned Accountant Member) and the sales made during the same period plus the purchases made for the period 1-4-1990 to 15-5-1990 and the sales made during the same period. I do not propose to set out the calculation in this respect as the same finds due place in the order of the learned Accountant Member in para 3. On the ground that the assessee must have sold the aforesaid stock outside the books of account, the Assessing Officer made an addition of Rs. 84,985. On further appeal, the CIT(A) confirmed the addition on the same line of reasoning. 5. Being aggrieved with the aforesaid two additions sustained by the CIT(A), the assessee came up in appeal before the Tribunal At this stage, the viewpoint canvassed on behalf of the assessee was to the effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember decision of the Ahmedabad Bench of the Tribunal in the case of Gurubachan Singh J. Juneja, was also relied upon. 7. In pleading the revenue's case, the learned D.R. strongly relied upon the orders of the lower authorities and the subsequent arguments advanced by her were more or less a reiteration of the reasons recorded by the said authorities in rejecting the assessee's claim and making and sustaining the impugned additions. 8. The learned Accountant Member in considering the viewpoints canvassed by both the parties took the view that the GP rate shown at 1.19 per cent was "rather low" as compared to the GP rates declared during assessment years 1985-86 to 1989-90. According to him, the increase in the custom duty on scrap from 30 per cent to 50 per cent could not account for the fall in the GP rate to the extent found, more so when the sale price of scrap must have also been increased by the assessee after taking into consideration the increase in the custom duty. The learned Accountant Member also upheld the view of the tax authorities in the sense that he opined that the non-availability of scrap at the time of search went to show that all was not well with the account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ountant Member has discussed the matter at length in his order and insofar as the addition on account of the gross profit rate is concerned, he has not accepted the assessee's viewpoint in entirety but accepted the revenue's case insofar as the applicability of proviso to section 145(1) is concerned. As already noted by me earlier, the learned Accountant Member categorically observed that the increase in custom duty could not take care of the entire decline in the GP rate as compared to assessment year 1989-90 but allowing part benefit to the assessee and taking into account the past history of the case as set out in para 4 of his order he in the ultimate analysis concluded that it would be fair and reasonable to apply a GP rate of 1.90 per cent. In fixing the aforesaid GP rate, it was noted by him that all was not well with the accounts maintained by the assessee, more so when no scrap was found at the time of search. In other words, the decision of the Tribunal in the case of the sister-concern, i.e., Gupta Metal Industries, has been taken into account only for the limited purpose of allowing some benefit to the assessee vis-a-vis the increase in the custom duty. The learned Judi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it must be appreciated that when the CIT(A) decided the matter, the judgment of the Tribunal in the case of the sister-concern was not available having been delivered subsequently. As against the reasoning given by the learned Accountant Member in allowing part relief to the assessee, the learned Judicial Member has not rebutted any of the points made in allowing necessary relief. In the final analysis, I, after considering the submissions of both the parties, agree with the view taken by the learned Accountant Member to sustain the addition to the extent of GP rate at 1.9 per cent on the sale of scrap after allowing shortage of 1 per cent. In concluding, I would agree with the learned Accountant Member insofar as the first point of difference consisting of two additions is concerned. 14. In respect of second point of difference, the facts are set out in para 10 of the order of the learned Accountant Member and to summarise these, there were search and seizure operations on the premises of the assessee on 15-5-1990 when all the records were seized and taken away by the Income-tax Deptt. but subsequently these were destroyed in a fire during Anti-Mandal agitation. The assessee rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
