TMI Blog2016 (7) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... IGH COURT ] - Held that:- The judgment as relied on by the ld. CIT (A) pertains to the business outstandings. From the paper book as filed, in Annexure-B to Form No. 3 CD, it is stated that the loan from M/s. B.K. Industries is of ₹ 2,50,000/-. However, in respect of M/s. Pooja Steels, ₹ 1,00,000/- also treated as loan. There is no material available on record suggesting that these amounts were treated as advances and related to any sales or purchases. The onus is on the assessee to demonstrate that such loans/credits were related to business/trade of the assessee. In the absence of such material, treating the same as trade advance would not be correct. Hence the ratio as laid by the Hon’ble Jurisdictional High Court would not help the assessee. Accordingly this ground of revenue’s appeal is allowed and the impugned order on this issue is set aside. The addition made the AO on this issue is sustained - Decided against assessee - ITA No. 319/JP/2015 - - - Dated:- 3-6-2016 - SHRI KUL BHARAT, JM SHRI T.R. MEENA, AM For The Revenue : Shri Raghuvir Singh Dugar (Addl.CIT) For The Assessee : Shri M.L.Borad (Advocate) ORDER PER SHRI KUL BHARAT, JM. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and contrary to the material placed on record. 3.2. On the contrary, the ld. Counsel for the assessee reiterated the submissions as made in the synopsis and submitted that the AO has failed to appreciate the fact that in the current year there is increase in the gross turnover and same cannot be compared with the rate of earlier years as the profit ratio varies from year to year and is dependent upon various factors. The ld. Counsel submitted that in the age of tough competition the assessee as a business strategy, has reduced the margin which resulted into increase in the turnover. As the margins are decreased, natural consequence would be lesser profit ratio. Therefore, he submitted that the AO was not justified in adopting the gross profit at 2.39%. 3.3. We have heard rival contentions, perused the material on record and orders of authorities below. The ld. CIT (A) while deciding this issue has given finding of fact in para 4.6 of his order as under :- 4.6. I have carefully considered the findings of the AO as also the submission of the appellant. It may be noted that the AO has rejected books of accounts by applying provisions of sec. 145(3) of IT Act and after rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s certain falsity is detected in the books of accounts. Therefore the appellant disputed the rejection of the books of accounts. As regards estimation of profits, the appellant s contention is that the rate of gross profit dependent on many factors including market conditions and with the increase or decrease in the cost of material, value of sales as also trading expenses, the GP rate will show commensurate changes. In this backbground, it is stated that the sales of the assessee have increased to ₹ 31.76 crores approximately in assessment year under consideration as compared to sale of ₹ 10.98 crores approximately in A.Y. 2010-11 and that no achieve such higher turnover the assessee adopted policy of low margin which resulted into GP rate. The appellant also filed details in respect of sales and purchases on random basis which indicated that the GP rate during this F.Y. in different months varied between 0.78% to 1.66% and that the average rate of GP was 1.25%. It was accordingly claimed that the estimation of profit by applying higher GP rate was also not justified. On careful consideration of all relevant facts, it may be mentioned that the provisions of sec. 145(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year under consideration has increased to 37.76 Crores as against ₹ 10.98 crores in AY 2010-11 and ₹ 7.42 crores in AY 2009-10. The fact that with the increase in turnover/sales decline in GP rate is expected is also supported from the following decisions of Hon ble Jurisdictional ITAT Jodhpur relied upon by the appellant. i. ITO vs. Arun Kumar Gupta, 103 TTJ 134 (Jd) ii. Madan Lal vs. Income Tax Officer, 99 TTJ 538 (Jd) It is also fact that the assessee has reduced the profit margin during the assessment year under consideration to achieve the higher sales of the turnover and these facts were also before the AO. It is also fact that the appellant has furnished purchase and sale bills on random basis indicating that the profit rate varied between 9.78% to 1.67% and these facts were also before the AO. The AO has not pointed out any falsity in such claim. Moreover the regular books of accounts were also before the AO at the time of assessment proceedings and it is not the case that GP rate of 2.38% was evidenced from the books of accounts. The fact that the sales of the assessee increased to ₹ 31.76 crores as compare to 10.98 crores in the immed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation was furnished. The ld. CIT (A) deleted the addition by observing that when profit has been estimated by applying a particular GP rate, no further addition can be made by placing reliance on the judgment of Hon ble Jurisdictional High Court in the case of CIT vs. G.K. Contractor (supra). The judgment as relied on by the ld. CIT (A) pertains to the business outstandings. From the paper book as filed, in Annexure-B to Form No. 3 CD, it is stated that the loan from M/s. B.K. Industries is of ₹ 2,50,000/-. However, in respect of M/s. Pooja Steels, ₹ 1,00,000/- also treated as loan. There is no material available on record suggesting that these amounts were treated as advances and related to any sales or purchases. The onus is on the assessee to demonstrate that such loans/credits were related to business/trade of the assessee. In the absence of such material, treating the same as trade advance would not be correct. Hence the ratio as laid by the Hon ble Jurisdictional High Court would not help the assessee. Accordingly this ground of revenue s appeal is allowed and the impugned order on this issue is set aside. The addition made the AO on this issue is sustained 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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