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2016 (1) TMI 26 - ITAT MUMBAI

2016 (1) TMI 26 - ITAT MUMBAI - TMI - G.P. addition - CIT(A) reducing the G.P from 30% to 15% - Held that:- CIT(A) and the A.O. have rightly rejected the books of account, because there were discrepancies in the books of account and the purchases were not found to be verifiable. We also in agreement with the ld. CIT(A) on the adoption of GP ratio of 15% as against 30% adopted by the A.O.in A.Y. 2006-07 and GP ratio of 28% as against 30% in A.Y. 2007-08 as against GP rate of 27.18% declared by th .....

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proceedings. In our considered opinion, the ld. CIT(A) is quite justified in deleting the disallowance made by the A.O. We find no reason to interfere with the order of the ld. CIT(A) and accordingly we uphold the same - Decided against revenue - I.T.A. No. 1973/Mum/2011, I.T.A. No. 1974/Mum/2011, Cross Objection No. 209/Mum/2014, Cross Objection No. 210/Mum/2014 - Dated:- 31-7-2015 - SHRI G. S. PANNU, AM AND SHRI SANJAY GARG, JM For The Revenue : Shri R.A. Dhyani For The Assessee : Shri Nares .....

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olidated order for the sake of convenience. 2. Common grounds have been taken by the Department in both these appeals (only difference in the amounts). The Grounds taken in ITA No. 1973/Mum/2011 for the A.Y. 2006-07, which is taken as lead case, read as under:- (1) On the fact and in the circumstance of the case and in law the Ld. CIT(A) has erred in reducing the G.P from 30% to 15% considering the submission of copies of invoice of exports, indicating sales price, hand embroidery and job work c .....

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nsidering the submission of various evidences during the appellate proceedings ignoring the fact that: a) The assessee has failed to produce the supporting evidence before the AO at the time of assessment proceedings b) Admitting the additional evidence without giving the AO an opportunity is violation of Rule 46A of I.T Rules. (3) The appellant prays that the order of the CIT(A) on the above ground be set side and that of the AO be restored. 2. The facts of the case are that the assessee is a p .....

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that this is the first year of business of the assessee, the details as required were not furnished by the assessee, majority of purchases made by the assessee were unverifiable, embroidery charges/job work/processing fees could not be substantiated as the parties were untraceable, the payments were made by bearer cheques. The A.O. also observed that there were various discrepancies in the accounts of the assessee which the assessee was not able to reconcile. The A.O. accordingly estimated the g .....

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e assessee and it does not mean that the purchases were not genuine and the A.O. has wrongly substituted the G.P. rate of 30% against the GP rate of 11.333% actually earned by the assessee. The assessee also submitted that the payments were made through banking channel and the addition has been wrongly made by the A.O. The ld. CIT(A) after considering the submissions upheld the A.O. s action in invoking the provisions of section 145(3) of the Act as the books of account do not provide the correc .....

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93.08 1,31,249.59 9.03 9 04.03.2006 16,90,912.83 7,57,719.36 7,44,372.00 1,88,821.47 11.17 14 08.03.2006 18,32,919.04 11,22,486.34 4,34,110.74 2,76,321.96 15.08 17 08.03.2006 18,32,783.16 9,71,212.30 6,64,110.74 1,97,231.09 10.76 22 11.03.2006 19,57,360.00 10,60,819.65 6,01,105.00 2,95,435.35 15.09 23 13.03.2006 22,54,169.08 12,39,579.60 7,62,930.00 2,51,659.48 11.16 27 27.03.2006 17,78,151.00 9,76,739.84 5,35,952.00 2,65,459.16 14.93 Based upon this chart, the ld. CIT(A) estimated the gross pro .....

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of A.O. in invoking the provisions of section 145(3) of the Act, has wrongly adopted the gross profit ratio at 15% instead of 30% adopted by the A.O. The ld. D.R. also stated that the ld. CIT(A) has not given opportunity to the A.O. while admitting the additional evidences under 46A of the Income Tax rules, 1962. He strongly relied upon the order of the A.O. 4. On the other hand, the ld. Counsel for the assessee relied upon the order of the ld. CIT(A) particularly to para 12 at page 10 and stat .....

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n merits. 5. We have heard the rival submissions and perused the material carefully. In our view, the ld. CIT(A) and the A.O. have rightly rejected the books of account, because there were discrepancies in the books of account and the purchases were not found to be verifiable. We also in agreement with the ld. CIT(A) on the adoption of GP ratio of 15% as against 30% adopted by the A.O.in A.Y. 2006-07 and GP ratio of 28% as against 30% in A.Y. 2007-08 as against GP rate of 27.18% declared by the .....

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₹ 33.65 lacs in A.Y. 2007-08. The entire amount is shown as liability under the head sundry creditors . The A.O. asked the assessee to furnish the details of the expenses along with confirmation and relevant invoices, reasonableness of such commission and details of payment. In reply, the assessee submitted that he has paid commission to one party namely Sinar Mandiri from Indonesia, being his export commission agent. The A.O. held that the entire foreign exchange commission was a fictiti .....

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the foreign export commission has paid to one agent namely Sinar Mandri, who is selling the products of the assessee in Indonesia and also other countries. The assessee also submitted that specific invoice details on which foreign export commission is paid were furnished through Annexure 7. The assessee also submitted that these payments were made under the regulation of Reserve Bank of India and which are monitored and regulated by the RBI which permits foreign commission @ 12%. The assessee al .....

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