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2015 (4) TMI 973 - ITAT HYDERABAD

2015 (4) TMI 973 - ITAT HYDERABAD - TMI - Addition on account of concealment of income - Rejection of books of account - AO observed Variation in the rates of bullion in a single day - Estimated the profit @ 0.5% of the total turnover of pure gold - Held that:- We find that the average gross profit as a percentage of turnover of Pure Gold was less than 0.098% as returned by the assessee for the current A.Y except for the assessment year 2008-09 where the gross profit return was 0.1%. In view of .....

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M. Jagtap And Smt. Asha Vijayaraghavan JJ. For the Appellant : Shri Ramakrishna Bandi For the Respondent : Shri C.P. Ramaswamy ORDER Per Asha Vijayaraghavan, J.M.: This appeal by the Revenue is directed against the order of ld. CIT(A)-VI, Hyderabad dated 23/09/2013 for AY 2009-10. Assessee also filed C.O. against the said order of CIT(A). 2. The cross objection filed by the assessee was delayed by 234 days. The reason for the delay has been stated in the Affidavit filed by the assessee dated 30. .....

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I have been advised to file a cross objection, which should have been filed by middle of April, 2014. The delay of about 234 days has been caused due to misplacement of the postal envelop, heart attach suffered by my Chartered Accountant Sri P.M. Venkatesan due to the proposed demolition of his office by GHMC and consequent writ petition etc., to safe guard his office and my inability to precisely give the date of service of Form No.36 to be filled in the Cross Objection memo, besides frequent .....

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ing total income of ₹ 15,97,648. The Assessing officer from the sale bills, books of account, bills/vouchers produced found that the sales are mostly cash sales and the pure gold rates differed in a single day. In this regard, a show cause notice was issued to the assessee calling for information on the differences in the rates varied in a single day and why the difference in rates should not be treated as the unexplained income for the year under consideration. The assessee in response su .....

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s large they try to dispose of the goods at the earliest and make quick turnover and deposit the receipts in their loan account with the bank by which the interest burden can be reduced. It was submitted-that the rates would be constant only on holidays otherwise, as in the case of stock exchange, the rates change from morning to evening. The assessing officer observed that the assessee had not furnished the details of rate fluctuations at different timings and have not produced any details exce .....

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to tax and hence rejecting the books of account estimated the profit @0.5% of the total turnover of pure gold of ₹ 309,21,97,256/- which worked out to ₹ 1,54,60,986/- and brought the same to tax. Aggrieved by the order of Assessing Officer, assessee carried the matter in appeal before the CIT(A). 5. Before the CIT(A) assessee filed petition for admission of additional evidence being in the nature of graphic details of the relevant period for the AY under consideration. The assessee s .....

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officer. As sought by the assessee, the additional evidence was admitted and. was forwarded to the assessing officer for submission of remand report. The assessing officer on examination of the graph stated that there are rate fluctuations in a day, however to ascertain the genuineness on other dates where the sale rates were reported to be constant, the AR of the assessee was asked to furnish the graphic details pertaining to the dates on 02.04.2008, 05.04.2008, 19.04.2008, 08.05.2008, 15.05.2 .....

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ejecting the books is affirmed. The AO further stated in the remand report dt 08/08/2013 as under: The additional evidence produced by the assessee has no sanctity for the following reasons: a) Though the graphic details reveals rate fluctuation, the assessee has sold at uniform rates on the dates mentioned above, which confirms that the assessee has not complied the standards of / market rates that are prevailing in day-to-day affairs. b) on verification of the graph produced, it is found that .....

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inaccurate information. e) The 'assessee stated that the rates are varying' basing upon the international markets. As seen from the daily newspapers, the rates of pure gold and silver vary from place to place i.e. the rates are different at Hyderabad, Chennai, Mumbai, Vijayawada, Visakhapatnam and Proddutur. Hence, the objection raised by the assessee regarding the rate variation depending upon the rates of the international markets is not correct. If the assessee's contention is co .....

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T(A) after considering the submissions of assessee observed that assessee had a huge turnover of ₹ 309.21 Crores under the head of trade in bullion itself, for the year under reference, on which the profit of ₹ 30,38,314/- was offered, as per the details brought on record. It was observed that during the course of the assessment proceedings, the A.O has observed that the assessee was recording the purchases as per the market rates, which were shown to be fluctuating constantly, inclu .....

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llion sales of ₹ 309,21,97,256/- resulting in net addition of ₹ 1,24,22,672/- (Rs.1,54,60,986 - ₹ 30,38,314). The CIT(A) further observed that assessee's objection on the issue was that where the rate is fluctuating, the sale rate cannot be stable or uniform, for which the assessee was relying on the graphic details on price variation. . The CIT(A) noted that the main complaint of the AO including the observations in the Remand Report is that the assessee was making the sal .....

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if not on all the days, but on few days as pointed out by Assessing Officer. CIT(A) observed that it is clear that where the sale prices are not in consonance with the purchase prices and where the sales are taking place in cash, such transactions are becoming vulnerable for suspicion or doubts, with lack of veracity. CIT(A) was of the view that the AO is justified in adopting the gross profit on the bullion different from the rates shown by the assessee in books, by rejecting the books of accou .....

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lting in additional profits of ₹ 1.24 Crores to the assessee. It is a fact that the margins are quite low in trading in bullion and specially in the wholesale trading, such margins are bound to be much lower. However, the assessee failed to exercise the option/opportunity for explaining on the observations made in the Remand Report, on the issue. Keeping all the above facts in mind, it is held that there is scope for manipulations of the profits, where the sales are effected in cash and sa .....

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rtly Allowed. 7. Aggrieved by the order of the CIT(A) the revenue is in appeal before us raising following the grounds of appeal: 1. The ld. CIT(A) is not correct in fact and in law in reducing the margin of estimated profit in situation when the books of account of the assessee/firm have been rejected. 2. The Ld. CIT(A) is not correct in fact and in law in reducing the profit margins without any comparable cases in the same line of trade. 8. Assessee also filed C.O. against the order of CIT(A) .....

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