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2015 (6) TMI 888 - ITAT AHMEDABAD

2015 (6) TMI 888 - ITAT AHMEDABAD - TMI - Estimation of income - G.P. addition on account of unaccounted sale of stock - CIT(A) restricted addition - whether the GP rate of 10% is to be applied or the GP rate of 30.87% is to be applied on the sale of stock presumed to have been made outside the books? - Held that:- Considering the facts of the case and the arguments 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 .....

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ks. 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. For the Appellant : Shri O P Vaishnav, CIT-DR For the Respondent : Shri Jimi Patel, CA O .....

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8377; 35,91,400/- to the extent of ₹ 11,63,394/- on account of unaccounted sale of stock of ₹ 1,16,33,944/-. 3. The facts of the case are that there was search at the assessee's business premises on 11.02.2009. During the course of search, certain documents were found and seized. On the basis of those seized documents, the Assessing Officer was of the opinion that the opening stock as per books should have been ₹ 3,18,99,819/-, but the stock disclosed by the assessee in the .....

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ade 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 .....

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its have already been taxed. 6.5 Now, coming to the estimation of the profit in respect of the shortage of stock of raw material, it is seen that the assessing officer has applied the gross profit rate of the relevant year under consideration. Such gross profit rate is in respect of the finished products, in the case of the appellant, such product is electrical transformers. Therefore, the assessing officer has adopted the gross profit rate as per the books of account of the appellant which rela .....

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he most logical and obvious presumption is that the sale of stock outside the books of accounts is only of raw materials and not the 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 suc .....

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t; 4. The Revenue aggrieved with the order of the CIT(A) is in appeal before us, while the assessee is not in appeal. 5. We have heard both the parties and perused the material placed before us. Since the assessee is not in appeal against the order of the CIT(A), the limited dispute between us is whether the GP rate of 10% is to be applied or the GP rate of 30.87% is to be applied on the sale of stock presumed to have been made outside the books. The Assessing Officer has applied the GP rate of .....

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rate of 30.87%. Since there is a shortage of raw material and there is no evidence that the same have been converted into the finished goods and then the electrical transformers have been sold by the assessee outside the books, the CIT(A) opined that the sale outside the books was of the raw material and not of the finished goods. Considering the facts of the case and the arguments of both the sides, we do not find any justification to interfere with the order of the CIT(A). The shortage is of .....

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d 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. Accordingly, we uphold the order of the CIT(A) and reject the appeal of the Revenue. IT(SS)A No. 144/Ahd/2012, Revenue's Appeal for AY 2008-09 6. The only ground raised in this appeal by the R .....

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raw material of ₹ 39,00,000. However, the CIT(A) has further noticed that the assessee had already disclosed the sum of ₹ 3,00,000/- as profit from sale of stock outside the books; therefore, after giving the credit of ₹ 3,00,000/- from the GP of ₹ 3,90,000/- (10% of ₹ 39,00,000/-), the CIT(A) rightly sustained the GP addition at ₹ 90,000/-. Accordingly, his order is upheld and the Revenue's appeal is rejected. IT(SS)A No. 145/Ahd/2012, Revenue's Appe .....

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