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TMI Blog2015 (1) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... ss profit by applying the G.P. rate of 2% as against 0.69% shown by the assessee on the sale of mobile recharge coupons after rejecting the books of account under section 145(3) of the I.T. Act, (961 for want of any supporting bills/vouchers/evidence as the assessee did not maintain the register regarding the margin/profit /discount received from M/s Bharati Airtel Limited. 4. On the facts and in the circumstances of the case, the order of the Ld. CIT(A) deserves to be set- aside and that of Assessing Officer be restored." 2. The brief facts of the case are that the assessee is engaged in the business of mobile recharge, trading of cell-phones and the case of assessee was selected for scrut9iny. During assessment proceedings, the A.O. observed that's the assessee had declared the GP rate of 1.19% on sale of mobile sets. The A.O. further on the basis of test check on various purchase and sale bills of various cell phones arrived at the conclusion that the average GP earned by assessee was 2.25% and therefore assessee was show caused as to why GP rate of 2.25% against 1.19% shown by the assessee be not taken for the purpose of arriving at gross profit. In response, the assessee fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was asked to explain. In reply, the assessee furnished detailed reply and submitted that assessee was a participant of hub distribution of Bharti Airtel Ltd. and its profits as allowed by Bharti Airtel Ltd. was to be shared between spoke and retailers. It was further submitted that the assessee used to charge spoke and retailers on the basis of fixed margins as fixed by Bharti Airtel Ltd. It was submitted that the margin declared by assessee was correct. The A.O. did not accept the contention of the assessee and made addition of Rs. 12,39,724/- by holding as under: "In the above reply, the assessee has accepted that he has received 4.27% margin from Bharti Airtel Limited. But the assessee has not furnished the details and evidence of how much margin / profit pass on to spoke and retailer. In the reply, the assessee has stated that his margin is 0.70% of total sales. His total sales from this business are RS.94522084.50 and 0.70% of this comes to Rs. 661654.59 whereas the assessee has shown the gross profit of Rs. 650718.32. Therefore, it can be said that the gross profit was not correctly worked out or the gross profit has been suppressed. The assessee has also failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er a new mobile set was launched in the market with more features, there was less demand for old sets. Thus in order to effect the sale of old mobile sets, the same were some times as less than the purchase price. The appellant has relied on various case laws of the Hon'ble Courts in support of his contention. It is a well known fact that whenever a new mobile set is launched in the market in a new set-up with changed features, the customer which in majority are teenagers run after it and after few months when another Model is launched in the market with different features, the mobile set earlier purchased by them seems less attractive to them and they again go after the latest Model. Similarly, in the case of car it is a general trend that whenever a new Model is launched, even the customers who are more matured than the teenagers go for the new Model. Even in that case the car manufacturing companies in order to attract customers, reduce the prices of car with old version with a hefty sum. Thus such attitude of the customer is universal and has to be viewed in that perspective. Therefore, the appellant's submissions to the effect that the old mobile sets were sold at lowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the system of accounting followed by the assessee is such that the correct profits cannot be deduced therefrom. The mere fact that there was negative OP in sale of mobile sets, the books cannot be rejected. Reliance is Placed on the decision of the Hon'ble Madhya Pradesh High Court in the case of Trivedi Bros (JA) v CIT (1986) ITR 705. (iii) The A.O. should record a clear finding that the correct profit cannot be deduced from the method of accounting adopted by the assessee before rejecting the book results. Rather the AO had accepted such method of accounting in the preceding years. Reliance is placed on the decision of the Hon'ble ITAT Jaipur in the case of DCIT v Mewar Textiles Mills Ltd (1999) 64 ITJ 502. In light of the above facts and following ratio decidende of the Hon'ble Courts (supra), it is held that the AO was not justified in invoking provisions of sectionl45(3) of the Act, estimating GP @ 2% and thereby make addition of Rs.l3,80,077/-. The same is directed to be deleted. Grounds Nos.l to 4 are allowed." B) 2nd addition of Rs. 12,39,724/-: The facts of the case, submissions made by the appellant, remand report of thy AO and rejoinder of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished Spoke-wise sales of flexi-recharge (LAPU). It has been observed that the element of commission amount, which is inclusive in sale amount is directly passed on by M/s Bharti Airtel Ltd. to Spoke and Retailer and the appellant has no control over such decisions. Therefore, the applicability of T.D.S. provision may rise against M/s Bharti Airtel Ltd. In light of the above the facts no adverse inference is drawn in respect of applicability of TDS provisions on the appellant. The AO in his remand report dated 21-05-2007 has not commented upon the submissions/details/evidence furnished by the appellant. This implies that the AO has not drawn adverse inference in respect of submissions/details/evidence furnished by the appellant which were forwarded to the AO for remand report. Even otherwise the appellant has 'furnished enough details and evidence to substantiate GP declared @ .69% from recharge business. Thus in light 'of the above facts it is held that the Ad was not justified in estimating GP @ 2% and thereby making addition ofRs.12,39,724/-. The same is directed to be deleted, Grounds Nos.5 to 8 are allowed." 5. Aggrieved, the Revenue is in appeal before us. 6. At th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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