TMI Blog2010 (2) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... show-cause notice issued by the Excise Department, the assessee had cleared excisable goods without payment of excise duty between July-2002 and December-2002, the same was worked out 58,01,795 meters of cloth. The Assessing Officer estimated the value of such removal of goods to be ₹ 12,76,39,490/-. This amount was added as unexplained investment in purchase of goods. The Assessing Officer also noted the fall in Gross Profit rate and made an addition of ₹ 81,77,779/-. However, since the amount of ₹ 12,76,39,490/- was added as an investment, the addition on account of fall in Gross Profit was not separately made but was telescoped against the value of alleged illegal removal of cloth. The Learned CIT(Appeals) held that Gross Profit rate applied by the Assessing Officer is incorrect and reduced the addition on account of low Gross Profit to ₹ 14,11,700/-. The Learned CIT(Appeals) also held that the unexplained investment for alleged illegal removal of goods should be made only for the month of July-2002 as rest is only recirculation of the same amount. The Learned CIT(Appeals) held that in July-2002 11,00,623 meters of cloth were removed illicitly the valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department or during search by Excise Department it was never found that the assessee is processing the goods on own account. Therefore, since there is no purchase of grey fabrics, no addition can be made as unexplained investment in purchase of goods. As per the finding of Commissioner of Central Excise Customs, Surat what is held is that only 58,01,795 meters of cloth was removed without payment of Excise duty and based on this finding, when the questions were put to the assessee, the assessee has made a disclosure of ₹ 50 lacs. Therefore, no further addition is sustainable. The ld. counsel for the assessee also submitted that the entire sale price cannot be added as income. Only Gross Profit contained therein can be added. For this proposition, reliance was placed on following decisions:- Sr. No(s) In the case of Reported in 1. CIT vs. President Industries 258 ITR 654 (Guj):: 158 CTR 372 (Guj.) 2. CIT vs. S.M.Omer 201 ITR 608 (Guj.) 107 CTR 272 (Cal.) 5.1. The ld. counsel for the assessee als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the assessee is found to be processing the goods without recording the same either in excise record or in the books of account, only the profit of such processing can be brought to tax. The Learned CIT(Appeals) has found in page No.6 of his order that the average rate of job charges per meter are ₹ 7/- and the total profit on such removal works out to ₹ 77,20,857/- by applying the Gross Profit as earned in immediately preceding financial year. This facts and figures are not disputed by either parties. We, therefore, sustain the addition of ₹ 77,20,857/-. However, since the assessee has already disclosed the income to the extent of ₹ 50 lacs by way of application of such income, further addition of ₹ 27,20,857/- only can be sustained. We, therefore, sustain the addition of ₹ 27,20,857/- as against ₹ 1,97,66,427/- sustained by the Learned CIT(Appeals). 8.1. We also hold that for removal of such goods without recording the same in the books, the assessee was made to pay Excise duty. It is submitted that the assessee has paid the excise duty. Subject to verification of payment of such duty, the same is to be allowed as deduction in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Profit against the last years resulted. The Learned CIT(Appeals) adopted the Gross Profit at 25% and sustained the addition of ₹ 14,11,700/-. However, no separate addition was made as the addition was telescoped against the purchase of goods. Since we have held that the assessee is only a job-worker and the profit on removal of such goods without payment of Excise duty, the books of account are to be rejected but on account of estimate of Gross Profit in respect of recorded turnover was rightly estimated at 25% by the Learned CIT(Appeals) and addition of ₹ 14,11,700/- is to be sustained. 13. Ground No.3 of Revenue s appeal is against restriction in the addition of ₹ 15 lacs on account of unexplained cash credit. 14. The Assessing Officer observed that the assessee has received share application money of ₹ 15 lacs from seven different persons. The notices issues u/s.133(6) were returned unserved. The assessee was asked to produce the parties for verification. The assessee filed confirmation of these parties but could not produce the parties personally. The Assessing Officer, therefore, has treated the amount as unexplained cash credit. 15. The Learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the I.T. Act, 1961. The assessee filed all the evidences to show that there was purchases of colour/chemicals supported by bills and also the fact that the payment was made by A/c payee cheque . Therefore, the addition rightly deleted by the Learned CIT(Appeals). 19. Next ground of Revenue s appeal is against deletion of addition of ₹ 8,28,218/- on account of work-in-progress. 20. The addition was not separately made as the same was telescoped against the total addition made on account of undisclosed investment and profit thereon. Since the assessee has already disclosed a sum of ₹ 50 lacs being difference in value of stock and the addition on account of profit has also been sustained, no separate addition is now required to be made. Therefore, addition was rightly deleted by the Learned CIT(Appeals). 21. Next ground of appeal is against deletion of disallowance of ₹ 5,08,942/- on account of interest on money advanced to sisterconcerns. 22. After considering rival submissions, we find that as per the finding of Learned CIT(Appeals), the assessee has sufficient interest-free fund of over ₹ 196.17 lacs and the interest-free advances were given out ..... X X X X Extracts X X X X X X X X Extracts X X X X
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