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2016 (1) TMI 533 - ITAT DELHI

2016 (1) TMI 533 - ITAT DELHI - TMI - Trading additions - addition by not accepting the trading results and applying gross profit rate of 20% as against 13.90% declared by the assessee - Held that:- As the facts and circumstances of the current year are admittedly similar to those of the preceding year, except for an additional item of trading, being Almirahs, in respect of which again the average GP rate comes to 25.29%, we are inclined to go with the results of the preceding year. In our consi .....

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8377; 7.87 lakhs stood allowed as deduction. The mere fact that no new parties were introduced by these directors etc. of the company, cannot be a reason for making disallowance of commission if the continuation of business is due to the services rendered by the commission agents/directors. The terms of Agreement, referred to in the assessment order, provide that they had undertaken the entire responsibility of the realization of sale proceeds. In such circumstances, the factum of having rendere .....

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assessee and there is no other evidence of commission payable at armís length rate, we are of the considered opinion that it would be just and fair if the deduction for commission is allowed at the same rate on which it was paid and allowed in the preceding year. This would result into disallowance of excess commission to the tune of ₹ 86,700/-. We reduce the addition to this level. - ITA No.1893/Del/2011 - Dated:- 23-10-2015 - SHRI R.S. SYAL, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUD .....

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ismissed. 3. Ground No.2 is against confirmation of addition of 31,12,074/- made by the Assessing Officer by not accepting the trading results and applying gross profit rate of 20% as against 13.90% declared by the assessee. 4. Briefly stated, the facts of the case are that the assessee is engaged in the trading of medical equipments and educational goods. During the year under consideration, the assessee declared gross profit of 70,89,542/- on gross turnover of 5.10 crores yielding GP rate of 1 .....

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in the preceding year. Considering the position in entirety, he refused to accept the trading results and applied GP rate of 20%, which resulted in addition of 31,12,074/-. No relief was allowed in the first appeal. 5. We have heard the rival submissions and perused relevant material on record. It is a matter of record that the assessee did not maintain any quantitative tally as is apparent from its audit report. There is no mention of any stock register having been maintained as per para 9B of .....

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d not maintain any quantitative tally. The mere fact that the purchase and sales were vouched cannot in itself be a reason to accept the trading results when the most crucial aspect, being the valuation of closing stock, is unsubstantiated. 6. The ld. AR contended that the books of account were not rejected by the AO and as such he could not have resorted to application of an arbitrary GP rate. There is no weight in the argument advanced by the ld. AR. It is vivid from the assessment order that .....

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Except for writing in so many words that he was rejecting the books of account, the entire discussion in the assessment order on this issue is focussed on rejection of accounts. 7. When books of accounts are not properly maintained and correct profit is not determinable, the best course is to go by the results of the preceding year unless the facts justify departure therefrom. It is noticed that the business activity of the assessee has admittedly remained similar to that of the preceding year, .....

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mirahs by taking purchase cost as denominator. We agree that the gross profit rate is computed by dividing the amount of gross profit with the figure of turnover and then multiplied with 100. If the GP rate is calculated in a proper manner with the figures rightly taken by the ld. CIT(A), still such GP rate from Almirahs comes to 18.31 % and 32.26% with average of 25.29%, which is still more than 20% as applied by the AO. 8. It was also submitted that the learned first appellate authority failed .....

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ignored by the learned first appellate authority. When pointed out, he contended that M/s Chandigarh Industries omitted to include the amount of excise duty in the invoices but, later on, the assessee was obliged to pay such duty. In support of this argument, the assessee placed on record a copy of the ledger account of M/s Chandigarh Industries in its own books of account which was stated to be certified by M/s Chandigarh Industries. We are unable to accept the charging of excise duty at 22.20 .....

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ible to accept the ld. AR s contention that the suppliers were ignorant about their liability to pay excise duty at the time of issuing invoices and that was the reason for which they allegedly charged it later on. Further, no direct evidence has been brought on record by the ld. AR to the effect any excise duty was later on recovered by these two suppliers from the assessee. In view of these facts, we are disinclined to accept the argument advanced on behalf of the assessee that the GP from ste .....

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ore, uphold the view taken by the ld. CIT(A) in upholding the addition of 31.12 lakhs. This ground is not allowed. 10. Ground No.3 is against the confirmation of addition of commission amounting to 9,81,876/-. The facts apropos this ground are that the assessee claimed to have paid a sum of 14,14,252/- as commission to its directors and sister concern covered u/s 40A(2)(b) of the Act. On being called upon to justify such payment, the assessee stated that no remuneration/salary was paid to the di .....

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