9911796707
TMI Blog2016 (12) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... fit of Rs. 84,00,219/- which works out to 19.39%. From the various details furnished by the assessee he observed that the gross profit for the A.Y. 2008-09 was shown at 26.34%. On being questioned by the Assessing Officer to justify the reasons for fall in the GP it was submitted that due to continuous increase in recasting, consumables, tools, lubrication, transportation, wages and power consumption the gross profit rate has been reduced. However, in absence of any supporting evidence the Assessing Officer disbelieved the submission made by the assessee and proceeded to investigate the matter. 3. From the profit and loss account the Assessing Officer noted that the assessee has claimed machining charges of Rs. 1,84,26,327/- which according to him was very high as compared to earlier years. From the various details furnished by the assessee he further noted that an amount of Rs. 1.29 crores out of Rs. 1.84 crores has been given to the following 4 sister concerns : Adinath CNC Engineering Works 44,60,166 Champion CNC Engineering Works 47,76,121 Vardhman CNC Engineering 14,62,141 Sonashri CNC Engineering 22,01,324 Total 1,28,99,752 4. Since the machining charges claimed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work undertaken, reduction etc. and sale depends upon the volume of scrap generated, market rate etc. It was argued that the assessee has sold all the scrap through separate invoice and therefore the figures so declared should be accepted. 7. However, the Assessing Officer was not fully satisfied with the explanation given by the assessee. He observed that although there is some force in the assessee's submission and argument, however, it cannot be accepted in its entirety because the assessee has failed to provide the basic information in the form of total quantity of material available through purchase/job work for machining, total quantity despatched/sold after machining and total quantity of scrap generated, total quantity sold and remained in stock in terms of kilograms. He further noted that although the assessee has shown percentage of scrap sale as high as 20.90% in the month of April 2009 and more than 18% shown for the month of July 2009 and January 2010, however, the yearly average is only 14.22%. Considering the average sale of scrap @17% for the earlier 2 years, giving due weightage to assessee's submission and considering the nature of job work carried out by assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 79,283 Vehicle maintenance 1,19,318 23,863 Repairs & maintenance 5,77,554 1,15,510 Total 3,54,651 The Assessing Officer thus made addition of Rs. 33,90,712/- on various heads as discussed above and determined the total income at Rs. 44,15,760/- against Rs. 10,25,047/- declared by the assessee. 10. In appeal the Ld.CIT(A) upheld the action of the Assessing Officer and dismissed the appeal filed by the assessee. Aggrieved with such order of the CIT(A) the assessee is in appeal before the Tribunal with the following grounds : "(1) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the disallowance of Rs. 14,73,396/- out of machining charges which is necessary item of expenditure to earn the profits of in this line of business made by the A.O. on the basis of assumptions, presumptions that too rejecting the well maintained books of account invoking provisions of S. 145(3) of the Act. The addition be quashed and set aside. (2) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the disallowance made by the A. O. of Rs. 2,84,707/- out of machining charges paid to part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is very much on the higher side. He submitted that the assessee has maintained books of account which are duly audited and the auditors have not pointed out any mistake. Therefore, no addition should have been made on account of machining charges, sale of scrap, loading and unloading expenses and the disallowances of various expenses. 12. In his alternate argument he submitted that since the book results have been rejected by the Assessing Officer a reasonable estimate should be made to the GP which according to him should be 18%. 13. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that the Assessing Officer in the instant case has thoroughly investigated the matter and has made reasonable disallowance which has been upheld by the CIT(A). The Ld. Counsel for the assessee has not brought any material to suggest as to how the disallowance made by the Assessing Officer and upheld by the CIT(A) is erroneous. He accordingly submitted that the order of the CIT(A) be upheld and the grounds raised by the assessee should be dismissed. 14. I have considered the rival arguments made by both the sides, perused the orders of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind much force in the above submission of the Ld. Counsel for the assessee in the above arguments since the Assessing Officer has conducted indepth enquiry to find out the fall in the GP rate as compared to the preceding assessment year. However, I find some force in the argument of the Ld. Counsel for the assessee that if the huge addition as made by the Assessing Officer and upheld by the CIT(A) is considered, then the GP rate comes to 23.34% which is much more than the GP shown in the immediately preceding assessment year, i.e. A.Y. 2009-10 at 19.39%. I find the GP rate of the assessee in the preceding 2 assessment years as well as the current assessment year are as under : 2008-09 26.34% 2009-10 17.39% 2010-11 17.22% Total 62.95% Average 20.98% 17. Considering the totality of the facts of the case and in the interest of justice, I am of the considered opinion that adoption of 21% of GP under the facts and circumstances of the case will meet the ends of justice. I hold and direct accordingly. Accordingly, the Assessing Officer is directed to recompute the GP and make suitable addition. The grounds raised by the assessee are accordingly partly allowed. 18. So far as g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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