TMI Blog2002 (9) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... the production, sale and net profit of the company respondent. On the basis of the information collected from the Central excise department he worked out the net profit at 2.67 per cent. As there was wide variation in the net profit as arrived at by the AO on the basis of information collected and the net profit as reflected in the books of account he concluded that provisions of s. 145(2) are clearly applicable. On the basis of 25 instances collected by him and narrated in his assessment order he applied net profit rate of 2.67 per cent on the declared sales which resulted into trading addition of Rs. 13,05,606. 4. The learned CIT(A) had deleted this addition after recording the following reasons at pp. 4 to 6 of his order: (i) The AO has tried novel method to estimate the profit of the appellant. The method adopted by him is not proper as it is bound to give misleading results. (ii) From the records it appears that all the sales and purchases of the appellant are vouched and even quantitative details are available, though not in the form and manner the AO wanted. (iii) The inability of the appellant-company to produce the details in the format desired by the AO is unders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounts rather, on the other hand, he has accepted the total sales as declared by the appellant and has also not made any disallowance out of expenses. He would hold that he had no justification to reject the book results. 5. The learned Departmental Representative relied on the order of the AO. 6. The learned authorised representative relied on the order of the CIT(A) and also made the following submissions: The AO has made the addition on the basis of declaration furnished to the Central excise department, Bhilwara No addition can be made in view of the following submissions: (i) Under the Excise Act the assessee used to submit declaration in the beginning of every year on estimated cost, estimated selling price and estimated net profits so as to arrive at the valuation of goods for levy of excise duty purposes. This declaration has to be submitted at production stage and not after making the actual sales. Hence, statements are mere estimates and have no relevancy with actuality. The appellant used to submit the excise declaration statement once in a year for releasing the processed fabric from the process house for every quality processed there. Once such statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted with the excise department are subject to various discounts, etc. which are not considered in that declaration. In this respect it is further submitted that various expenses viz., sales, commission wastage, damaged fabric quality, depreciation, interest cost, selling and dispatch expenses are either not taken into consideration or considered at an estimated figure which is bound to vary during the year. All these factors result in observation and slow movement of fabric and that has adverse affect on the margin of profit. In some cases it may result in loss. Therefore, the estimation filed under Excise Act is relevant only for the purpose of levy of excise duty on the goods manufactured. The same is completely irrelevant for the purpose of estimation of income under the IT Act. (v) The method adopted by AO is defective, as he has not considered the quantitative details of the particular quality. If the profit rate in particular quality is higher but sales are negligible then it will effect overall net profit. 7. In addition to above arguments the learned authorised representative also made the following further submissions: (i) The assessee maintained complete regular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titative tally. Hence, the CIT(A) has rightly deleted the trading additions. This view is also supported by Jaipur Bench in Sona Textiles (P) Ltd. vs. Asstt. CIT (1997) Tax World 82 (Jp). 9. Lastly the learned authorised representative contended that the net profit declared by the assessee is better than previous two years. A comparative chart of net profit for the year under consideration and the previous two years was filed. During the year under appeal the assessee declared net profit rate of 0.74 per cent as against net profit rate of 0.62 per cent and 0.46 per cent in the asst. yrs. 1991-92 and 1992-93 respectively. The estimation made by the AO was without any basis, completely misleading, improper and without pointing out any defects in the books of accounts. The AO had accepted total sales as declared by the assessee. Therefore, the learned CIT(A) has rightly deleted the addition. 10. We have considered the rival submissions. The company-respondent is a manufacturer of polyester suitings. During the year under appeal, the assessee has declared net profit rate of 0.74 per cent and the AO had applied net profit rate of 2.67 per cent on the basis of information collected f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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