TMI Blog2013 (8) TMI 1085X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, the ld. CIT(A) has erred in directing the A.O. to restrict the estimated production of bricks to 35,00,000 against 44,49,600/- estimated by the A.O. 2.1 The facts leading to the above appeals are that the assessee is a partnership firm engaged in the business of manufacturing and sale of Bricks. The assessee-firm started its business from 27/04/2007, the date on which it came into existence and this year was its second year of business. For A.Y. 2009-10 the assessee-firm filed its Return of Income (ROI) on 18/03/2010 declaring total income of ₹ 23,083/-. In fact the total turnover of the year is ₹ 31.77 lakhs. The assessee has paid interest plus remuneration to partners of ₹ 1,62,689/- and has shown net profit rate of 5.13%. But the A.O. has made assessment u/s 144 r.w.s. 145(3) of the Act vide order dated 28.11.2011 on a total income of ₹ 50,06,400/-. The A.O. has made addition mainly on the grounds of suppression of production of bricks and tiles. The assessee has shown a production of 27.80 lakhs of bricks whereas the A.O. has estimated the production at 40.04 lakhs of bricks and 4.45 lakhs of tiles. The basis of this addition is the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give such opportunity of hearing. Thus ground no. 3 is decided in favour of revenue. The ground no. 4 to 12 is related with the estimation of production of bricks and estimation of sale price of bricks tiles. As regards to these grounds from the perusal of detail on the record it is seen that AO has made the addition in the routine and perfunctory manner. The letter from the mining department only confirms the payment of royalty it does not mention anything about the production of bricks done by the appellant. On the contrary it specifically states that as per new policy dated 10.6.1994 only royalty per block is fixed due to which there is no necessity to verify the production achieved by the license holder. Further AO fails to bring on record any other corroborative material to justify the estimation of excess production made by him, in the absence of such material the estimate would only be based on conjecture and surmises. Further payment of Royalty and Purchase of mitti (clay) itself cannot determine the quantum of production, the same. How much capacity was actually utilized by the appellant should have been probed further by the AO but was not done. No instance of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or estimation of profit the past history of the case is the best guiding factor, accordingly looking to the totality of the facts and circumstances of the case and considering the material collected by the AO during the Assessment proceedings and the submission/replies filed by the appellant, it was reasonable if production should near to license sanctioned by the mining department. Therefore, I estimate total production of bricks 35,00,000 for the year under consideration. In this trade, it is fact that the sale price of bricks fluctuated number of times in different season. One side the appellant has produced the sale bill of minimum rate to prove the average sale whereas on the other side the AO took sale bill of maximum rate for this purpose. To cover up all the possible leakage it is fair and reasonable to apply GP rate 22 % on total bricks of 35,00,000. The balance addition is deleted. The ground no. 13 of appeal is against non deduction of remuneration and interest to partners from the estimated profit. There is no discussion on the assessment order. During the course of appeal hearing the A/R for the appellant submitted that it was a settled law that salary a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimate the production in the given facts and the circumstances of the case. After rejection of books of account the A.O. should have applied the rate declared and accepted in regular assessment in the immediate past year. The assessee had disclosed n.p. rate of 5.82% in the A.Y. 2007-08. At page 5 of assessee s paper book the details of comparable results are given which are as under :- Turn over Gross Profit Financial Year 2008-09 7499916 15.50% 2007-08 5885716 15.30% Accordingly, we accept the sales / turnover disclosed by the assessee and direct that n.p. rate of 5.82% has to be applied to the declared sales subject to interest and remuneration to the partners as already allowed by the ld. CIT(A). In this way we partly allow assessee s appeal but cannot allow the appeal of the revenue. B ITA No. 242/Jodh/2013 (A.Y. 2009-10) This appeal has been filed by the assessee for A.Y. 2009-10 against the order of ld. CIT(A), Bikaner, dated 22/02/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks from each trolly of sand thus worked out total bricks manufactured form 5 73 3 trollies at 1,14,66,000 and held to be unrecorded production of bricks. The Id. AO gave details of income computed on page 5-6 of assessment order, according to which total no. of bricks manufactured was worked out at 1,65,56,000/- (1,14,66,000+50,90,000).Thereafter profit was worked out as follows :- No. of Bricks sale rate sale cost profit Grade-I Bricks 9391920 2142 20117492 12002873 8114619 Grade-II 1.535% Bricks 5478620 1500 8217930 7001676 1216254 Residuary 5% 782660 700 547862 1000239 -452377 Profit 8878496 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineer, SGNR who has certified that the license to install and run bricks kiln was granted on 19.02.2007 and royalty is collected assuming the maximum annual capacity of this Bhata will be production of 40,50,000 bricks (150x 1000x27). The assessee has disclosed turnover 74,99,916 bricks which is almost twice of estimate made by the Mining department despite all these facts, the Id. AO has not afforded an opportunity of being heard to the assessee, nor he has provided any basis or source from which the foundation of such abnormal estimate was laid. The Id. AO has thus violated principles of natural justice and on this basis alone the addition made was sought to be deleted. The Id. Counsel has further pointed out that the Id. AO omitted to consider the fact that sum of ₹ 8,60,000/- debited in trading account under the head Mitti represents cost of Mitti purchased from Trolly owners as well as expenditure incurred on excavation of Mitti from assessee's own land for which he has obtained license. Such expenses included labour payments for excavation, removal of over harden and transportation thereof, shifting of excavated sand to the site of Thapai. Nonconsideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in different season. One side the appellant has produced the sale bill of minimum rate to prove the average sale whereas on the other side the AO took sale bill of maximum rate for this purpose. The appellant has not properly maintained records of production as well as quality wise stock. The defects noticed in the books of accounts by the AO were serious enough. Considering the entire facts and circumstances of the case and the discrepancies pointed out by the AO, to cover up all possible leakage of revenue the AO is directed to apply a gross profit rate of 20 % against the 15.58 % declared by the appellant. The A.O. is directed to recast the trading account and give relief accordingly. The appeal is allowed in part as indicated above. The other ground do not require any adjudication in view of the above decision on Ground No. 2 In the result the appeal is partly allowed. 4.2 The assessee is further aggrieved and before us, both parties have reiterated their earlier stand. As is evident from the assessment order, the A.O. has rejected the books of account of the assessee and has made estimated addition. The facts, the evidence and the stand of both the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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