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2015 (11) TMI 1434 - ITAT CHANDIGARH

2015 (11) TMI 1434 - ITAT CHANDIGARH - TMI - Rejection of books of accounts - G.P. addition - sale of material treated as profit for working out the Gross Profit on contract receipts by AO - CIT(A) deleted part addition - Held that:- Held that:- CIT(Appeals) found that assessee had produced Hot Mix material from its plant for its contract work and the excess production was sold to outside parties leading to turnover of ₹ 43,06,319/- on this account. This finding of fact recorded by ld. CIT .....

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income of the assessee. The cost of the material sold should have been deducted from the turnover in order to arrive at the profit of the assessee. The ld. CIT(Appeals), therefore, on the total turnover of ₹ 43,05,319/- of Hot Mix material correctly directed to apply profit rate for the purpose of making addition, therefore, rest of the addition of ₹ 39,61,815/- was rightly deleted. There is no error in the order of the ld. CIT(Appeals). - Decided against revenue. - ITA No. 843/Chd/2 .....

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f sale of material of ₹ 43,06,319/- has been treated as profit for working out the Gross Profit on contract receipts. The Assessing Officer has pointed out several defects in maintenance of the books of account and accordingly rejected the same under section 145(3) of the Act. Thereafter, the Assessing Officer observed that assessee had shown gross profit of ₹ 45,50,072/- on the total work done of ₹ 10,88,77,849/- which included an amount of ₹ 43,06,319/- by way of sale o .....

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d in the appellate order in which the assessee briefly explained that Assessing Officer made this addition wrongly after considering the entire value of sale of Hot Mix material of ₹ 43,06,319/- as income without deducting cost of material sold. The Assessing Officer should have applied the profit rate on the sale value of the material sold to ascertain the cost of material sold before working out the gross profit on sale of such Hot Mix material. It was submitted that Assessing Officer ha .....

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s wholly unjustified. The ld. CIT(Appeals) accepted the contention of the assessee and deleted part addition as above. His findings in para 4 of the appellate order are reproduced as under: "I have considered the facts of the case, the basis of addition made by the Assessing Officer and the arguments of the AR on the issue during assessment as well as appellate proceedings. It is seen that the appellant had not put forth any credible arguments in support of his claim of maintaining proper b .....

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any credible objection by the appellant during the appellate proceedings. However the AR of the appellant has pointed out that entire amount of material sales have been reduced from the gross profit which meant that the entire sales were representative of gross profit and there was no cost of materials sold. It is seen that the assessee had produced hot mix material from its plant for its contract work and the excess production was also sold to outside parties leading to turnover of ₹ 43, .....

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profit in order to have an idea about the gross profit shown by the assessee on its normal contract receipts. The gross profit so worked out comes to 3.86% which compares favourably with the working done by the Assessing Officer. There is no reason why the cost of material produced by the assessee for selling the hot mix should be treated as profit itself. Therefore, the addition of ₹ 39,61,815/- is directed to be deleted." 4. The ld. DR relied upon order of the Assessing Officer, on .....

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