TMI Blog2013 (9) TMI 1129X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the CIT(A)-VII, Hyderabad dated 29/08/2012. As identical issue is involved in these appeals, they were clubbed and heard together and, therefore, we dispose of these appeals by way of consolidated order for the sake of convenience. 2. Briefly the facts of the case are that the assessee, a private company is deriving income from the business of manufacture and sale of detergent cakes. Search and seizure operations were carried out in the case of the assessee on 18/06/2008. In response to the notice u/s 153A, the assessee for the assessment years 2003-04, 2004-05, 2006-07 and 2009-10 declaring income of ₹ 81,55,270/-, ₹ 1,20,58,100/-, ₹ 65,97,320/- and ₹ 57,19,610/- respectively, whereas, the AO had assessed the total income at ₹ 82,68,118/- for AY 2003-04, ₹ 1,56,73,585/- for AU 2004-05, ₹ 70,81,056/- for AY 2006-07 and ₹ 59,76,624/- for AY 2009-10, by making certain additions based on the theory of percentage of net profit over gross profit. 3. While computing the taxable incomes of the assessee for the years under reference, the AO had made additions of ₹ 1,12,848/-, 36,15,485/-, 4,83,736/- and ₹ 2,57,014/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76 55.76 Based on the above workings of average percentage of net over gross, at 77.28%, the AO had made the said additions by pitting the average percentage of net over gross (77.28), against the percentage of the net over the gross for the respective assessment years. For AY 2009-10, the average percentage of net over gross had been worked out at 55.76 against the percentage for that year which stood at 53.16. The said additions had been made by the AO by observing that the assessee had not admitted the normal profits form its manufacturing activity as compared to the other years in consideration and had understated the incomes, for the respective years. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(A). 6. Before the CIT(A), the assessee contended that the additions were made by the AO on conjectures and surmises such as assumed percentage of net over gross and in the process comparisons were made with the subsequent assessment years, with reference to some years, which is not justified. It was also contended by the assessee that the AO, without pointing any specific defects and not being in any possession of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, as indicated, are in pursuance of action u/s 132 of the IT Act and there is no indication that there is any evidence to indicate that the assessee is indulging in suppression of profits, as per the information brought on the record. In view of the above observations, the CIT(A) was of the view that there is no basis for the AO to draw the inferences as to the working of the profits on notional and fictitional basis as adopted in the assessment order. 8. Further, the CIT(A) observed that on examination of the method adopted by the AO, it is clearly indicative of the highly discriminating method chosen to arrive at the presumed unaccounted profits and it is clear that for few assessment years, for example AY 2003-04, the AO had used the basis for the subsequent years and whereas in the case of another AY 2009-10, the basis taken was on history of purely earlier years/periods. Thus, there is no consistency in the method adopted by the AO in arriving at the average of net over the gross for different assessment years under reference. He further observed that the gross profits and the net profits of the business are two different yardsticks indicting the profits of the business a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying upon the order of the AO submitted that the CIT(A) has not appreciated the detailed working and discussion made by the AO before making additions for the assessment years under consideration for declaring low profits. 12. On the other hand, the learned AR of the assessee placing reliance on the order of the CIT(A) contended that the AO without pointing out any specific defects and not being in any possession of any specific information, is not correct in alleging that the assessee understated the incomes. Further, he contended that the assessments were invariably completed u/s 143(3) of the Act and the returned incomes were accepted without making any addition. It was further contended that the assessments for the years under consideration were completed u/s 153A, in pursuance to action u/s 132 of the Act and no information for making such additions were found during the search proceedings. It was pointed out that the basis of calculation, as adopted by the AO are imaginary and without any record to the aspects of relevance to direct and indirect costs and the word used normal profits as pointed out by the AO in the assessment order do not have any relevance in the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed income on estimate basis is not possible in the present circumstances to frame the assessment u/s 153C of the Act. Therefore, after considering the totality of facts and the circumstances of the case and after going through the order of the CIT(A) in the instant case, we find that the CIT(A) is perfectly justified in allowing the claims of the assessee. In this view of the matter, no interference is called for. 15. In the present case, we find that no incriminating evidence found against the assessee in proving that unaccounted incomes were generated by suppression of profit and, therefore, the AO is not justified in resorting to estimation and arithmetical assumptions. Accordingly, we find no infirmity in the order of the CIT(A) in directing the AO to delete the additions made by holding that the additions made based on the percentage of net over gross adopted by the AO are held to be without any basis that can be justified on factual or legal grounds and the order of the CIT(A) is hereby confirmed dismissing the grounds of appeal raised by the revenue in this regard in all the years under consideration. 16. In the result, all the appeals being ITA No. 1817, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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