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2015 (4) TMI 435 - ITAT AHMEDABAD

2015 (4) TMI 435 - ITAT AHMEDABAD - TMI - G.P. addition on insulated scrap - CIT(A) restricted the addition - Held that:- Finding of the ld.CIT(A), it is evident that the same is based on sound reasoning and material placed before him. As per the FIFO method, the G. P. rate in respect of insulated scrap for A. Y. 2005-06 was 7.65% whereas for A. Y. 2006-07, it was 1.11%, However, by LOT to LOT method, the G. P. rate for last year was 3.26% as against 1.66% for the present year. After considering .....

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rcumstances, it would be judicious to make an addition on account of decline of G. P. rate by increasing the G. P. by 1%. After applying this rate to the sale of the present year, the addition on this account comes to ₹ 1,97,134/-.

The ld.Sr.DR could not controvert the finding by placing any contrary material on record. Moreover, the Assessing Officer has not given any basis for estimating the profit on lump sum basis. Therefore, we do not see any reason to interfere into the fi .....

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ing the Address, PAN and the amount of commission paid to 3 persons. The A. O. in his remand report has not given any comments on the information submitted by the appellant. Since, the appellant has given necessary details for verification of commission expenses such as name and address of the person, PAN, confirmation of the person as well as Form 16A which was issued to the person to whom the commission was paid, the A. O. was not justified in disallowing the commission. No reason to interfere .....

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ining to Assessment Year (AY) 2006-07. 2. No one appeared on behalf of assessee. Notice of hearing was sent to the assessee fixing the date for hearing of the appeal on 19/03/2015 by Regd.Post AD [ RG 26683606 3 IN - as per evidence on record] which has been returned by the postal authorities with remarks Left . Since no new address has been furnished by the assessee, therefore it is presumed that notice is duly served, hence the appeals were taken up for hearing in the absence of the assessee. .....

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the disallowance of ₹ 2,08,802/- made by the Assessing Officer on account of commission expenses. 3. The Ld.Commissioner of Income-tax(Appeals)-XIV, Ahmedabad has erred in law and on facts in admitting additional evidences in violation of Rule 46A. 4. On the facts and in the circumstances of the case, the Ld.Commissioner of Income-Tax(Appeals)-XIV, Ahmedabad ought to have upheld the order of the Assessing Officer. 5. It is therefore, prayed that the order of the Ld.Commissioner of Income- .....

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ommission expenses amounting to ₹ 2,08,802/-. Aggrieved by the assessment order, the assessee preferred an appeal before the ld.CIT(A), who after considering the submissions of the assessee restricted the addition made on account of fall in GP to ₹ 14,78,543/- as against the addition of ₹ 50 lacs made by the AO and deleted the addition of ₹ 2,08,802/- made on account of disallowance of commission expenses. 4. First ground is against in restricting the addition made to the .....

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ded this issue by observing as under:- 4,4 Decision: I have carefully perused the assessment order and the written submission filed by the Id.AR of the appellant. The appellant has disputed the addition on account of G. P. rate and also the disallowance of commission expenses by way of one single ground of appeal. Since the issues are different, these are being dealt separately for the sake of clarity and convenience. (a) Addition on account of Gross Profit: It is seen from the assessment order .....

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onableness of estimated addition, it has been submitted by the appellant during the course of appellate proceedings through his written submissions as well as oral arguments before the undersigned that the A, O. was not justified in doing the same. The main points of various submissions made by him during the course of appellate proceedings are summarized as under: (i) The appellant has submitted quantify details of each items purchased and sold by him. (ii) The quantity and value wise compariso .....

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5 crore as against ₹ 2.16 crore in the last year. (vi) Since the appellant has dealt in different items of scrap, this year the G. P. ratio was not comparable with the preceding year. (vii) The appellant made sales on consignment to consignment basis, and therefore, yielded low G, P. (viii) The G. P, rate was higher in A. Y. 2005-06 (13.73%) on account of high G. P. rate in a single transaction. (ix) In respect of insulated scrap, if FIFO method is applied the G. P. rate would be high. How .....

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An examination of the various items of sale made by the appellant during the year, it is observed that the following main items have been sold by him during the year. Sl.No. Items A.Y. 2006-07 A.Y. 2005-06 Quantity Sale value(Rs.) Quantity Sale value(Rs.) 1. Cables and wire(Mtrs) 456361 1,97,13,230 5,54,846 1,54,49,900 2 Insulated scrap 233668 3,83,65,589 35,995 53,45,839 3. Copper scrap 135932 3,58,30,749 NIL NIL 4. Aluminium scrap 41420 49,52,783 NIL NIL 5. LDP Granules 20680 10,44,306 NIL NIL .....

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n the trading of insulated wires from 8.3% to 1.66% i.e. by about 7%. Similarly, there was a decline of G. P. of cables and wires (Mtrs.) by 2%. The overall G. P. rate shown by the appellant in the present year was 3.62% as against 10.78% in the preceding year. After considering the above facts, written submission by the appellant and the remand report of the A. O., I am of the opinion that the assessing Officer was not justified in making an estimated addition of ₹ 50 lacs. It would have .....

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ation. As is clear from the above table, that the main item which has resulted in decline of G. P, for the current year is insulated scrap. The submission of the appellant that the G, P. rate should be taken on LOT to LOT basis as it gives a clear picture of the profit margin of the appellant has some force. However, the comparison of the G. P. rate of two years cannot be made on LOT to LOT basis as it will not give proper result. There is a force in the appellant's submission that the quali .....

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as against 1.66% for the present year. After considering all the facts, and circumstances, it would meet the ends of justice if G, P. rate for the current year is taken @ 5%. The appellant has already shown a G. P. rate of 1.66%. Accordingly, the addition @ 3.34% of the G. P. which works out to ₹ 12,81,410/- is sustained in respect of insulated scrap. The other major items of scrap which can be compared with the figures of previous year is cables and wires mtrs. There is a decline of abou .....

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to make an addition on account of decline of G. P. rate by increasing the G. P. by 1%. After applying this rate to the sale of the present year, the addition on this account comes to ₹ 1,97,134/-. Accordingly, an addition of ₹ 12,81,41/- & ₹ 1,97,134/- totaling to ₹ 14,78,543/- is sustained as against the addition of ₹ 50 lacs made by the A. O. 5.1. From the above finding of the ld.CIT(A), it is evident that the same is based on sound reasoning and material plac .....

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t the ld.CIT(A) was not justified in deleting the addition. 7. We have heard the ld.Sr.DR, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has given a finding on fact, which reads as under:- 4.4 (b) Disallowance Commission expenses: The A. O. had made an addition of ₹ 2,08,802/- as the appellant could not furnish complete name and address of the persons to whom above commission was paid. It has been submitted by the .....

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which was issued to the person to whom the commission was paid, the A. O. was not justified in disallowing the commission. The addition made is accordingly deleted. 7.1. The above finding on fact is not controverted by the Revenue by placing any material on record. Therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Thus, this ground Revenue s appeal is rejected. 8. Ground No.3 is against in admitting the additional evidences in violation of .....

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