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2012 (10) TMI 353 - AT - Income TaxAddition on account of difference in P&L – Difference of Gross profit between audited P&L and seized P&L account by Excise department – AO made addition on the basis of difference amount – Held that:- As the net profit disclosed in the return of income is more than the net profit revealed by the seized P&L. Either the complete P&L as per the seized document is to be accepted or completely rejected as unreliable. It was not open to the Revenue to accept only the manufacture account from the seized paper as correct and to ignore the expenses revealed by the seized paper. No material has been brought on record by the AO to show that the expense revealed by the seized document under the heads conversion charges, furnace expenses and others are not tenable while computing the total income as per IT. Act. It also reveals that the expenses revealed by the seized P&L Account also contain certain expenses which were not allowable u/s 28 to 44AC. Issue decides against revenue. Addition on account of out of books of accounts - Purchase of land & building and P&M prior to commencement of production – Addition made by AO on the basis of MoU’s found during search – Vendor admitted receipt of Rs. 2.59 Crores from the assessee – Whereas Balance Sheet of the assessee reveals that the assessee has paid Rs. 2.42 Crore - Held that:- As concluding from the facts purchase has been made in in earlier previous year. MoU itself records the various dates on which various payments were made by the assessee. Revenue has brought no material, that the assessee has paid any amount more than Rs. 2.42 crores before 31.3.2004 against the purchase of assets. Issue decides in favour of assessee GP ratio on unrecorded sales – Whether AO can apply higher % of GP rate than the rate of % of GP accepted by revenue on sale already recorded in books of accounts - Held that:- The rate of gross profit of the current year is very relevant than the gross profit rate of the earlier year unless it is shown that the profit earned on the unrecorded sales were actually more than the profit earned on recorded sales of the relevant year. Ground of appeal decides in favour of assessee. Addition on account of unaccounted sale – AO argued that assessee has removed 135.110 MT of by- product, waste and scrap on the basis of seized documents by Excise department – Assessee contended that what was sold was re-rollers which was written as “RR” in the seized documents – Held that:- The assessee has also not brought any material before us to show that sale of re-rollers were recorded in the books of account of the current year. In the absence of any seized document and the order of the CESAT, we are not in a position to adjudicate this issue completely. Issue remand back to AO. Addition on account of difference in opening stock – AO found difference between closing stock as per the seized P&L Account of the preceding year, which was found correct by the CESAT and the opening stock which was as per the closing stock disclosed by the assessee in the immediately preceding year – Held that:- As found that the closing stock of Rs. 1,83,30,146/- as disclosed in the P&L Account filed alongwith the return of income of the immediately preceding year on the basis of which taxable income of the assessee was arrived as the opening stock of the current year. No addition required. Issue decides in favour of assessee Addition on account of unaccounted income earned from suppressed production - Central Excise Authorities worked out the average consumption of power per MT at 725 units as against 1150 units per MT shown in the production records of the assessee – On basis of this AO work out suppressed production of 2903.54 MT – Calculate GP rate on the basis of average of two earlier years instead of current year - Held that:- As concluded from the facts that the Revenue has accepted that the gross profit in respect of disclosed sales achieved by the assessee in A.Y. 2004-05 was 11.21%, A.Y. 2005-06 was 9.81% and in the year under consideration was 0.79%. In such a situation the gross profit rate found for the disclosed sales of the current year is a better parameter to estimate the gross profit on undisclosed sales than the gross profit secured by the assessee in earlier years. Issue decides in favour of assessee Disallowance u/s 40(a)(ia) for non-deduction of TDS on contract payments u/s 194C - Assessee has claimed deduction for transport charges on which TDS was not deducted – Assessee contended Sec. 40(a)(ia) were applicable only to expenses covered u/s 30 to 38 and that the freight charges paid by the assessee for bringing the material to the factory of the assessee were part of the purchase cost and were deductible u/s 28 – Held that:- Whom the transporters had the contract for transporting of the goods, whether with the assessee or with the suppliers. Hence, the same needs to be verified from the purchase bills of the assessee and other connected documents. Since both the parties have not filed the relevant materials before us, we are unable to adjudicate the issue completely. Issue remand back to AO.
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