TMI Blog2015 (6) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... finished goods, then the finished goods was sold outside books and the Revenue has to bring some corroborative evidence for such presumption. No corroborative evidence has been brought on record that the raw materials have been converted into finished goods and then the electrical transformers have been sold outside the books. In view of the above, we agree with the finding of the CIT(A) that the sale outside the books was of the raw material and not of the electrical transformers. Therefore, in our opinion, the applicability of GP rate of 10% on the sale of raw material by the CIT(A) is fully justified. - Decided against revenue. - IT (SS) A Nos. 143 to 145/Ahd/2012 - - - Dated:- 29-5-2015 - G D Agrawal, VP And Kul Bharat, JM,JJ. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of ₹ 35,91,400/-. On appeal, the CIT(A) rejected the assessee's contention that no addition can be made on the presumption that the stock was sold outside the books. However, he reduced the rate of GP from 30.87% to 10%. The relevant finding of the CIT(A) in this regard reads as under:- 6.4 Now, the most obvious and logical inference that can be drawn is that this shortage of stock is on account of sale of the same outside the books of account as has been the findings of the assessing officer. Such presumption of sale in respect of shortage of stock has been judicially recognized by the Hon'ble High Court of Gujarat in the case of President Industries (2002) 258 ITR 654. Moreover, the practice of sale of stock of raw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finished products. Therefore, I agree with the appellant that gross profit rate of finished products as per the books of account of appellant can not be applied to the sale of stock which admittedly consist of raw material only. Therefore, it will be in the interest of justice that the flat rate of 10% of profit is adopted in respect of the sale off stock since such profit is on account of retail trading of raw materials only. It is-to be kept in mind that the profit element is always higher in respect of sale made outside the books of account. 6.6 In view of the above, applying the net profit rate of 10% on the shortage of stock of ₹ 1,16,33,944/-, the net profit works out to ₹ 11,63,394/-. Thus, out of total addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments of both the sides, we do not find any justification to interfere with the order of the CIT(A). The shortage is of raw material and therefore, the normal presumption is that the raw material was sold outside the books by the assessee. If the Revenue claims that the assessee converted the raw material into finished goods, then the finished goods was sold outside books and the Revenue has to bring some corroborative evidence for such presumption. No corroborative evidence has been brought on record that the raw materials have been converted into finished goods and then the electrical transformers have been sold outside the books. In view of the above, we agree with the finding of the CIT(A) that the sale outside the books was of the raw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s erred in law and on facts and circumstances of the case by restricting the G.P. addition made by A.O. of ₹ 16,46,040/- to the extent of ₹ 2,52,400/- for AY 2009-10 on account of unaccounted sale of stock of ₹ 43,00,000/-. 9. We have heard both the parties and perused the material placed before us. The facts of the year under consideration are also similar to the preceding year; however, here the CIT(A) opined that the actual sales outside the books should be considered as 25.24 lacs and not ₹ 43 lacs. His finding in this regard reads as under:- 6.7 So far as assessment year 2009-10 is concerned, the assessing officer has taken ₹ 43,00,000/- as realization of undisclosed excess stock. This consists of & ..... X X X X Extracts X X X X X X X X Extracts X X X X
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