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2015 (3) TMI 440 - AT - Income TaxEstimation of gross profit rate - CIT(A) restricted addition from ₹ 15,80,694/- made by the A.O. to ₹ 2,80,383/- - CIT(A) assuming that the G.P. rate of 1.75% - rejection of books of accounts - Held that:- Books of account of the assessee are maintained on the same policies and methods of accounts as in earlier and subsequent years when the assessee's books of account have been upheld.The assessee's business model consists of 80% of trading of i.e. purchase and sale oil and 20% of manufacturing of oil. These facts have not been disputed by the ld. DR. Being a single commodity manufacturer, the assessee cannot be expected to stop the plant as and when a new lot of mustard seed is subjected to crushing as the manufacturing of mustard oil as a continuous process, this is also not disputed by the department. In these circumstances, it is unreasonable to expect from the assessee to shut the plant for crushing of every lot of mustard seed, the yield and maintain impossible day to day, lot wise stock in this behalf. Thus, the corresponding compliance insisted by the learned Assessing Officer is beyond the business reality and not a prevalent trade practice. (iv) Otherwise, the assessee has maintained proper day to day stock register of the inward and outward day to day stock of mustard seed, and mustard oil; traded as well as manufactured. We are unable to see any infirmity in the record and book keeping of the assessee in both these years. In view thereof, we are inclined to hold that the assessee's books of accounts have been unjustifiably rejected. - Decided in favour of assessee. Low yield or GP - whether can be a factor to make the trading addition when the assessee otherwise maintains proper books of accounts and quantity wise details - Held that:- When the books of account of the assessee are upheld mere low yield or low GP cannot be ground for addition on account of trading results. This is more so as the edible oil business profitability is volatile and depends on various factors i.e. the abundance of crops, demand and supply ratio, market trends and import policy of edible mustard oil. It cannot be expected as a universal policy that the assessee will earn a fixed rate or increasing rates of GP year after year. Thus no justification in making any trading addition in the case of the assessee. The same is deleted. - Decided in favour of assessee. Employees contribution disallowed - Held that:- Contribution paid before filing of the return, therefore, the same is allowable. - Decided in favour of assessee. Disallowance of telephone expenses - Held that:- On the issue of telephone expenses, the ends of justice will be made if the disallowance in respect of the telephone expenses is restricted to 10% instead of 20% as retained by the learned CIT(A). - Decided partly in favour of assessee.
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