TMI Blog2015 (11) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... , thus, he made lump sum addition of ₹ 5 lakhs, which has been upheld by the Tribunal. We do not find any error of law in the computation of the income in a manner in the absence of a valid justification of reduction of gross profit rate, a marginal addition of ₹ 5 lakhs was made. - Decided in favour of revenue. Profits and gains u/s 80HH and 80IA of the Act - Whether the term 'profit and gains' used in section 80HH and section 80-I of the Income-tax Act, 1961, with reference to an eligible industrial undertaking have the same meaning as the term 'income' whereas the statute uses both the terms independently in different provisions of the Act ? - Held that:- Question No. 2 is covered by the judgment of Vijay Solvex Ltd. v. CIT (2014 (7) TMI 136 - RAJASTHAN HIGH COURT) following the judgment of the apex court in Motilal Pesticides (I.) P. Ltd. v. CIT [2000 (2) TMI 9 - SUPREME Court] wherein held that both sections 80HH and 80M fall in Chapter VI-A relating to deductions to be made in computing total income. It will be seen that the language of sections 80HH and 80M is the same - D. B. Income Tax Appeal No. 125 of 2004. - - - Dated:- 24-2-2015 - SUNIL AMBWANI Actg. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in the business of the assessee-company. The assessee-company deals in purchase of various oil seeds, out of which certain oil seeds give more and better yield rate, whereas the lower quality of the oil seeds and oil cakes give lower yield rate, which cannot be compared with others. Tracing the history of the profits, the Assessing Officer found that despite the continuous profits, the profit rate started decreasing from 19.84 per cent. in the assessment year 1990-91 to 11.18 per cent. in the assessment year 1993-94. In view of these factors, and specially the fact that the assessee had maintained the books of account properly, the books of account of the assessee were rightly not rejected by the Assessing Officer but the addition of ₹ 5 lakhs, on the unexplained reduction of profit rate was justified. 4. Learned counsel appearing for the appellant-assessee submits that the books of account were not rejected by the Assessing Officer. He had simply raised doubt over it, without any material or findings with regard to proper maintenance of books of account. He submits that no error was detected in the books of account, and they were accepted by the Assessing Officer, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gible well grounded estimate and such estimate must be based on adequate and relevant material, inasmuch as, such estimate, is to be made in case of default committed by the assessee either in not making the return or not complying with all the terms of a notice under section 143(2) of the Act of a direction made under section 142(2A). It is on any one or more of this default that Income-tax Officer has to make a best judgment assessment after taking into account all relevant materials which may be derived from the records or which may have come into his possession into course of assess ment proceeding and which the assessee does not explain or contradict in respect of particulars given to him. The conditions enumerated in clauses (a), (b) and (c) under section 144 of the Act relating to best judgment assessment must be fulfilled before taking recourse to the best judgment assessment. The order annexures A and C do not reflect such considerations although the Tribunal at one stage has observed : 'In our opinion, the Income-tax Officer was jus tified in making the addition of ₹ 50,000 which marginally increased the rate of gross profit of the assessee. There is no justific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gross profit rate (%) 1990-91 4,58,31,787 90,95,300 19.84 1991-92 19,78,12,367 3,43,80,517 17.38 1992-93 39,76,59,696 5,48,20,047 13.78 1993-94 33,63,27,190 3,76,25,958 11.18 9. The Assessing Officer, on analysis of the above table, recorded the trend of the assessee-company for adopting decreasing the low profit rates. The reasons given for the low profit rate, despite the increase of the turnover and gross profits, was not accepted. The Assessing Officer, therefore, did not reject the books of account wholly, and even after accepting the method of accounting, made an addition of ₹ 5 lakhs on the ground that the profit rate shown by the assessee was much lower than the previous year. 10. Learned counsel appearing for the respondent-Department has relied on CIT v. British Paints India Ltd. [1991] 188 ITR 44 (SC), in which the Supreme Court has observed as follows (page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofess or Income from other sources is provided to be computed in accordance with the method of accounting, subject to the provisions of sub-section (2) in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Sub-section (3) of section 145 provides that where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provide in section 144. 12. In our view, following an accepted method of accounting and the consistency in maintaining such accounts, does not ensure the correctness or completeness of the accounts. Even if, the method of accounting is correct, the accounts may be maintained in a manner, in which without creating any doubt over the method of maintaining of the accounts, the Assessing Officer, for good and sufficient reasons recorded by him, find that the computation is in such a manner, which does not accurately records the profits and gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers (P.) Ltd.'s case [1979] 118 ITR 243 (SC) and held that deduction is to be allowed only on the net income and not on the gross income. With reference to section 80AB, this court said it was merely of a clarificatory nature and the decision of this court in Distributors (Baroda) P. Ltd.'s case [1985] 155 ITR 120 is thus irrespective of section 80AB of the Act. The High Court, therefore, relying on the decision of this court in Distributors (Baroda) P. Ltd.'s case [1985] 155 ITR 120 answered the question in favour of the Revenue and against the assessee. The Division Bench also found that the apex court in Himatsingka Seide Ltd. v. CIT decided on September 19, 2013 (Civil Appeal Nos. 1501 of 2008-since reported in [2014] 2 ITR-OL 467 (SC)) also took similar view. 15. Thus, question No. 2, in the present case, in respect of the same assessee, has been decided by the Division Bench of this court, with which we do not find any reason to disagree. Question No. 2 is also decided in favour of the Department and against the assessee-company. 16. We are informed that the apex court in Vijay Industries v. CIT (Civil Appeal Nos. 1581 and 1582 of 2005, dated November 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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