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Mrs. Sonali A. Shah Versus Income tax Officer-14 (3) (3) , Earnest House

2015 (8) TMI 1028 - ITAT MUMBAI

Rate of gross profit(GP)in respect of textile business and iron & steel business - AO Rejected the books of account and adopted the G.P. rate @20% in respect of textile business and 10% in respect of Iron and Steel business - FAA reduced the GP to 15.20 % in case of textile business and @ 3% for iron and steel business - Held that:- Identical issue has been adjudicated by the Tribunal,while deciding the appeal for the AY.2007-08 [2013 (4) TMI 724 - ITAT MUMBAI]. Respectfully,following the order .....

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out payment made to the creditors in subsequent years,that in the remand report the AO had not mentioned anything about on the spot inquiry by the inspector,that there was change in office of the FAA,that the new FAA passed the order where he mentioned about the inquiry conducted by the inspector,that the ledger accounts of the parties show that the assessee had paid the money to the creditors in subsequent years.Once the payment to the creditors is proved by necessary documentary evidences ther .....

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ems i.e. except the welfare expenses. - Decided partly in favour of assessee. - ITA No.2944/Mum/2013, ITA No.3671/Mum/2013 - Dated:- 5-8-2015 - Sh. A. D. Jain and Rajendra, JJ. For The Assessee : Shri Rahul Sarda - AR For The Revenue : Shri S. S. Rana-DR PER RAJENDRA, AM Challenging the order dated 28.02.2013 of the CIT-28, mumbai, the Assessing Officer(AO) and the assessee have filed cross appeals for the year under consideration. ITA No.3671/Mum/2013: The AO has filed following Grounds of Appe .....

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siness and 15.20% in respect of textile business, instead of 10% for iron & steel business and 20% for textile business as adopted by Assessing Officer. 3. The appellant prays that the order of the Id. CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. 4. The appellant craves leave to amend or to alter any ground or add a new ground, which may be necessary. ITA No.2944/Mum/2013: Grounds of appeal filed by the assessee read as under: 1. The Ld. CIT(A) erre .....

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ut appreciating the fact that any trader hardly earns G. P. from the range of 1 % to 2 % only. 3. The Ld. CIT (A) erred in confirming the estimation of G. P. at 15.20% i. E. Rs. 72, 39,554/- from Textile business without appreciating the fact that some parties had directly responded to the notices issued and for the rest the confirmations were filed by the Assessee. The CIT (A) failed to appreciate the fact that any trader hardly earns G. P. from the range of 1 % to 2 % only. 4. The Ld. CIT(A) e .....

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The Ld. CIT(A) erred in confirming the adhoc disallowance @ 20 % of Rs. 1,20,526/- on account of Motor car expenses, Motor car insurance, Depreciation on car, Telephone expenses, staff welfare expenses, etc. 7. The Ld. CIT (A) erred in con fuming the various disallowances and also separately estimating the G. P. 8. On merits the appellant denies its liability to the levy of penal interest u/ s. 234A, 234B and 234C. 9. The appellant craves leave to add, amend, alter or delete any of the above gro .....

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he assessee. During the course of assessment proceedings, the AO gathered that in the AY 2007-08, the assessee had inflated the purchases by obtaining bogus purchase bills and transactions routed through banks by illegal means. In that year, the AO issued notices u/s.133(6) of the Act to various parties with whom the assessee had dealt, but such transactions could not be proved. The AO rejected the books of accounts and estimated the G. P. from steel business @ 10% and 20% from textile business. .....

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and G. P. rate of 10% in respect of Iron and Steel on turnover of ₹ 17,10,84,032/ - and worked out the GP at ₹ 2,66,34,132/ - and made the addition accordingly. 2.1. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA), who reduced the GP to 15.20 % in case of textile business and @ 3% for iron and steel business. 2.2. It was brought to our notice that identical issue has been adjudicated by the Tribunal, while deciding the appe .....

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sed by the assessee giving a very low GP rate of about 1%. A survey u/s 133A was carried out in the case of the assessee wherein the assessee was found to be indulged in a practice of routing the unaccounted money through illegal ways and channelizing them to be looked like genuine transactions. She was also found to be in possession of some cheque books which were signed by various parties without mentioning any date and amount. Keeping in view these findings of the survey as well as the low gr .....

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ich the assessee failed to do. Although the assessee filed confirmations of some parties, the A. O. found the same to be unreliable for the various discrepancies specifically pointed out by him which the assessee again failed to explain. Before the A. O., the assessee produced computer generated bank book which contained number of entries of withdrawals and deposits which were without any narration. When this position was confronted by the A. O. to the assessee, the later failed to offer any sat .....

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el business of the assessee and therefore the book results of the said business should not be disturbed. However, as specifically noted by the ld. CIT(A) in his impugned order, the confirmations filed by the assessee of the parties pertaining to the iron and steel business were also found to be unreliable by the A. O. for the specific discrepancies pointed out therein which the assessee failed to explain. Moreover, both the iron and steel business and textile business were carried on by the asse .....

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business as sought to be contended by the ld. Counsel for the assessee. Even otherwise, some of the material defects pointed out by the A. O. as well as adverse findings of the survey were related to the overall business activities of the assessee which fully justified the rejection of combined books of account maintained by the assessee for iron and steel and textile business. 10. Having held that the rejection of the books of account of the assessee by the authorities below is fully justified .....

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e in the earlier years was accepted by the A. O. It is however observed that the assessment only for the A. Y. 2006-07 was completed by the A. O. u/s 143(3) of the Act and a perusal of copy of the relevant order placed at page 347 & 348 of the paper book shows that the issue relating to trading results was not at all discussed by the A. O. in the said order. Even the basic details relating to the trading results shown by the assessee such as quantum of purchases and sales etc. were not given .....

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) wherein the GP rate of 3.2% was accepted by the Tribunal as fair and reasonable. It is however observed that neither the said case nor any other comparable case was cited by the assessee before the A. O. so that the relevant aspects could be considered and verifed by him. Moreover, the A. O. has relied on certain comparable cases of textile business from his own jurisdiction where the GP rate declared was in the range of 10.62 % and 18.31%. In this regard the ld. counsel for the assessee has c .....

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me from textile business which may be taken at round figure of 15%. 12. As regards the GP rate to be applied in respect of iron and steel trading business, the ld. Counsel for the assessee has relied on the decision of the coordinate Bench of the Tribunal in the case of Inel Trading Company (supra) submitting that the low GP rate of 1.82% was applied in that case in respect of iron and steel business. It is however observed that although a GP rate of 1.82% was mentioned in the said order in resp .....

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f business of dealing in iron and steel, the reliance was placed by the A. O. on the comparative GP rates shown in the range of 5 to 10%. However, as admitted by the A. O. in the remand report forwarded to the ld. CIT(A), there were no specific comparable cases available on record to show such GP rates and the range of 5 to 10% was stated to be gathered by him from the information collected from the market. Having regard to all these facts of the case, we are of the view that it would be fair an .....

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f the assessee by adopting GP rate of 15% and 5% respectively for the textile business and for the iron and steel business. Effective Ground of appeal, filed by the AO, is partly allowed in his favour. ITA No.2944/Mum/2013: 3. First effective ground of appeal(GOA-2&3)filed by the assessee also pertain to GP rate of both the businesses. As stated earlier, the FAA had estimated the GP rates of textile business and iron & Steel business at 15.20% and 3% respectively. 3.1. Respectfully, foll .....

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found to be not traceable. As per the books of accounts the assessee had to pay ₹ 2.17 Crores to those seven creditors. As per the AO, the assessee could not produce the parties for cross verification. He held that the since the creditors had not been proved the liability shown by the assessee to the tune of ₹ 2,17,31,574/-was to be treated as ceased u/s.41(1)of the Act. 4.1. Before the FAA the assessee argued that the creditors were paid in subsequent years, that all the outstanding .....

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o the remand report filed by the AO in that regard and held that the AO was justified in making additions. 4.2. Before us, the Authorised Representative(AR)contended that evidence of payment to various creditors through banking channels was produced before the FAA, that no inspector was deputed by the AO, that the remand report is silent about the visit by the inspector, that the AO had not also not doubted the payment made to the creditors in the subsequent years. He relied upon the judgment of .....

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rom the AO with regard to the claim made by the assessee about payment made to the creditors in subsequent years, that in the remand report the AO had not mentioned anything about on the spot inquiry by the inspector, that there was change in office of the FAA, that the new FAA passed the order where he mentioned about the inquiry conducted by the inspector, that the ledger accounts of the parties show that the assessee had paid the money to the creditors in subsequent years. Once the payment to .....

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