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Commissioner of Income Tax Central –II Versus M/s. Navbharat Export

Disallowance of transport expenses - Held that:- Considering the totality of the expenditure which was about ₹ 7,21,16,088/-, the cash expenditure of ₹ 36,84,500/-, could not be said to be of such magnitude as to have led to the startling result of rejecting the entire books of account. Furthermore, the AO does not indicate any reason why he accepted 1.75% of the entire transaction as permissible cash transportation expenditure. We, therefore, agree with the findings of the ITAT and .....

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at the assessee during the course of hearing drew our attention towards the balance sheet and the accounts and shown us the opening stock, purchases and sale of bardana. In view of these findings which are entirely based on fact, this Court is of the opinion that unless the Revenue points out something fundamentally wrong or unreasonable in the ITAT’s approach, the question urged by it with regard to addition on this score, is inadmissible.

In view of the above conclusion, the further .....

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tion on account of interest which ought to have accrued is concerned, both the CIT(A) and ITAT were in unanimity in holding that such additions could not have been made. ITAT based its decision on the judgment of Commissioner of Income Tax v. Shoorji Vallabhdas and Co. (1962 (3) TMI 6 - SUPREME Court ). Having regard to these facts, this Court is of the opinion that there was no “real income” in the facts and circumstances of this case. In view of the concurrent findings, the Court will not inte .....

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the order of the Income Tax Appellate Tribunal (hereinafter referred to as the ITAT ) dated 31.01.2011, so far as it relates to the dismissal of its appeal and correspondingly the relief granted to the assessee for Assessment Year (AY) 2003-04. Assessments for four years 2002-03 to 2005-06 were made on 29.12.2006 under Section 153A pursuant to a search conducted on 07.10.2004. The Revenue urges that the ITAT fell into error on the following questions:- (i) Disallowance of expenses in the profit .....

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the AO. 2. The assessee at the relevant time, used to procure and restore rice after due processing. In the course of such procurement, it was contended to retain gunny bags supplied by the Food Corporation of India (FCI) and deal with them. After the search and during the assessment proceedings, the assessee had surrendered a sum of ₹ 1.75 Crores. Apparently, in the course of search, some excess stocks were found. On this basis as well as on an observation of the materials on record, the .....

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the CIT(A) ] contending that the AO s rejecting the books of account and imposing a gross profit margin of 12% was arbitrary. In doing so, the assessee attacked the AO s approach stating that so far as the transport expenses were concerned, of the total expenses, the entire expenses of more than ₹ 7.21 crores had been substantially accepted of which the details and records in respect of ₹ 36 Lacs odd was not available. This constituted just about 5.1% of the total transport expenses. .....

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evidence on record for all the years i.e. AY 2002-03 to 2005-06. It held that the reason for rejection of the books of account was not sound given that the assessee was maintaining the consistent accounting method which had been accepted during all previous years. So far as the irregularities with respect to bardana was concerned, the ITAT held as follows:- 12. …First objection given by the Assessing Officer for doubting book results of the assessee is that it has not shown sale of barda .....

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d by it with regard to addition on this score, is inadmissible. 6. In dealing with the rejection of the cash transactions towards transport expenditure, the ITAT reasoned as follows:- 12...The second objection pointed out by the Assessing Officer is that assessee has carried out cash transaction. These cash transactions relate to payment of freight charges to the transporter. We find from the record that assessee had incurred a sum of ₹ 7,21,16,088/- towards the freight. Out of this huge a .....

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ich was concededly in cash. Counsel for the Revenue points out that lower questionnaire was sought given to the assessee on 05.04.2006. The reply on this score belatedly on 04.05.2006 did not contain any particular. Be that as the case may be, at the same time, this Court is of the opinion that considering the totality of the expenditure which was about ₹ 7,21,16,088/-, the cash expenditure of ₹ 36,84,500/-, could not be said to be of such magnitude as to have led to the startling re .....

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orrect. The AO, in fact, does not appear to have rejected any results for AY 2002-03. The ITAT further held:- 12…The assessee in its audit report specifically alleged that it is maintaining stock register. The assessee has been lifting the rice from FCI godown and thereafter it is exporting. All the details of purchase, sales and exports are being maintained and shown to the Assessing Officer. In spite of that, in a flimsy way, Assessing Officer had made the above remark. The next objecti .....

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e verified from the factor, what type of rice it had purchased, how it has processed, what type of machinery it has used, those percentage ought to be compared with some similarly situated assessee or with the result of other years. No such steps have been taken by the Assessing Officer. He merely assigned one reason for the sake of giving reasons. 13. Assessing Officer has estimated the GP at 12%. In assessment year 2005-06, assessee itself has shown the GP at 13.14%. In that year, he estimated .....

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ion of the assessee that objections pointed out by the Assessing Officer have been refuted by it, still uphold the rejections of the book results, only on the ground that excess stock was declared during the course of search. As observed earlier, this may be one corroborative factor for doubting the accounts of the assessee, but it cannot be a sole criteria. More so, on the similar books of account and details, Assessing Officer could not find any fault in assessment year 2002-03 and in earlier .....

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