9911796707
TMI Blog1997 (11) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 goods purchased and sold were of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----------------- The Assessing Officer accordingly held that the assessee must have sold this stock outside the books of account. He accordingly made an addition of Rs. 84,985 on account of sale of unaccounted for stock. On appeal, the ld. first appellate authority confirmed the addition for the reasons given 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he alleged shortage may be on account of several factors, namely, pilferage by theft in the factory and even assuming that the alleged unaccounted brass was sold by the assessee outside the books, even then only the gross profit earned on such sales could be added to the total income and not the entire sales as had been done by the departmental authorities. Reliance was again placed on the decision of Gupta Metal Industries' case wherein addition is sustained to the extent of G.P. on unaccounted sales following the decision of the Third Member of Ahmedabad Bench in the case of ITO v. Gurubachan Singh 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we adopt the reasoning as given by the Bench in the case of Gupta Metal Industries. We may point out that in the case of Gupta Metal Industries, shortage was directed to be allowed at 5 per cent because there the assessee was dealing in manufacturing goods in the form of brass sheets which were obtained by melting scrap and as such the shortage was bound to be more whereas in the present case before us, the assessee was dealing only in re-sale of brass scrap and the shortage cannot be more than 1 per cent. Accordingly we direct that the addition on account of unaccounted scrap be calculated by allowing 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. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this order. 12A. Coming to the Revenue's appeal, the only other ground is against the action of the learned CIT(A) in setting aside the issue of addition of Rs. 64,45,880 to the file of the Assessing Officer for fresh adjudication. The Assessing Officer had made this addition in view of certain noting on the seized document from which inference was drawn that unaccounted sales till 15-5-1990 had been made to the extent of Rs. 64,44,880. This addition was made by the Assessing Officer on protective basis as the substantive addition on this account was made in the case of M/s. Luxmi Dhatu Udyog (P.) Ltd., the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guishable. Accordingly, in view of the facts and circumstances of the case, and after going through the case law cited and discussed above in the order, in my view, order of first appellate authority deserves to be upheld and addition made by the Assessing Officer and to the extent sustained by the CIT(A), on both these counts, deserves to be confirmed. I hold accordingly. 3. As regards ground No. (v) of the assessee's appeal and ground No. (ii) of revenue's appeal are concerned, for the reasons and basis as adopted by learned CIT(A), which I adopt as that of mine, I uphold her order on the point and this ground 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not find favour with the Assessing Officer on the ground that the assessee had not been able to furnish separate details of goods imported as also the goods locally purchased. The Assessing Officer accordingly rejected the book results and estimated the GP by applying a rate of 2.54 per cent as shown in assessment year 1989-90 ('last year' erroneously mentioned in the order of the learned Accountant Member) and made an addition of Rs. 97,980. On further appeal, the CIT(A) allowed a relief of Rs. 2,906 only and sustained addition to the extent of Rs. 95,077 by applying a GP rate of 2.5 per cent on the declared sales. 4. It may also 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 15-5-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer. The submission, in other words, was to the effect that some shortage was required to be allowed. It was also the further argument that a part of the shortage may be on account of pilferage by theft in the factory and even on the assumption that the alleged unaccounted brass was sold by the assessee outside the books, even then it was only the GP earned which was required to be added to the total income and not the entire sale figure as had been done by the tax authorities. Reliance was once again placed on the decision of the Tribunal in the case of the sister-concern, i.e., Gupta Metal Industries. The Third Member 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of the Tribunal in the case of Gupta Meal Industries, is not applicable as the facts are distinguishable. According to him, no two cases can be similar when the question comes to the application of a rate of profit. I would straightaway agree with the learned Judicial Member on this aspect of the matter since the best indicator is an assessee's own case, and its past history provided the facts and circumstances remain the same. One must, however, go further into the aspect of applying the decisions not rendered in an assessee's own cases but in the cases of other assessees either identically placed or otherwise. The learned Accountant 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount, the learned Accountant Member has once again upheld the view of the tax authorities to the extent that he has confirmed the addition not to the extent of the alleged sale consideration but only to the extent of GP rate once again at 1.9 per cent as in the case of the first addition but after allowing 1 per cent shortage with reference to the decision of the Tribunal in the case of sister-concern where the shortage allowed was much higher at 5 per cent taking note of the difference in the business carried on. As against this, the learned Judicial Member has once again adopted the reasoning of the CIT(A) and confirmed the addition whereas 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Metal Industries. As against this, the learned Judicial Member confirmed the view taken by the CIT(A) adopting the views of the first appellate authority as his own. 16. I have already observed while deciding the first point of difference that the learned Judicial Member has not rebutted any of the points made by the learned Accountant Member nor has he contradicted any of the findings of fact recorded in the order of the learned Accountant Member. I have also stated that the benefit of order of the Tribunal in the case of Gupta Metal Industries, was not available to the CIT(A) as the decision of the Tribunal came about subsequently. This aspect of the matter appears to have inadvertently escaped the attention of the learned Judicial Member. I have also observed while deciding the first point of difference that facts of two cases cannot be identical but decision rendered in another case can be relied upon for the reasoning and ratio expressed and which has been done in the present, case by the learned Accountant Member. In this view of the matter, I agree with the decision of the learned Accountant Member in respect of the second point of difference as well inasmuch as proper r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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