TMI Blog2016 (12) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... Facts of the case, in brief, are that the assessee is an individual and is engaged in the job work and manufacturing of Autoparts under the name of Sanmati CNC Engineering works . She filed her return of income on 28-09-2010 declaring total income of ₹ 10,25,050/-. The return was accompanied with tax audit report, profit and loss account and balance sheet and computation of income. During the course of assessment proceedings the Assessing Officer observed that the assessee has shown gross profit of ₹ 95,96,791/- on a turnover of ₹ 5,57,17,210/- which works out to 17.22%. He observed that in the immediately preceding assessment year on a turnover of ₹ 4,33,23,476/- the assessee had shown gross profit of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese respective months which not only looks absurd but unusual also. Rejecting the various explanations given by the assessee the Assessing Officer made disallowance of ₹ 2,84,707/- as excessive and unreasonable. 6. The Assessing Officer further noted that during the year the assessee has shown sale of scrap to the tune of ₹ 79,27,682/-. However, no stock of scrap has been shown in the books of account. On comparison of sale of scrap with earlier years he noted that this scrap shown for the impugned assessment year is on the lower side, the details of which are as under : A.Y. Scrap sale (Rs.) Total turnover (Rs.) % of scrap sale wrt turnover 2010-11 79,27,682 5,57,17,210 14.22% 2009-10 67,35,354 4,33,23,476 15.54% 2008-09 63,63,368 3,37,55,373 18.85% 16.20% He, therefore, asked the assessee to justify the same. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses are not properly vouched, supported by self-made vouchers and the identification of the person receiving the payment is not verifiable. No justifiable reasons have been putforth by the assessee during the course of hearing. On being asked by the Assessing Officer, it was explained that due to increase in the turnover and rate of labourers the expenses on account of loading and unloading has increased. 9. However, the Assessing Officer was not satisfied with the above explanation given by the assessee. Considering the nature of business, volume of turnover, work got done through sister concerns/outsiders, increase in rate of labour and defect in supporting evidences the Assessing Officer disallowed on adhoc basis 50% of such expenses and made addition of ₹ 2,80,887/-. Similarly, out of the various other expenses the Assessing Officer disallowed 20% of such expenses on the ground that these are supported by self made vouchers and the identity of the persons receiving the payment is not verifiable. In respect of telephone, travelling, vehicle maintenance some element of personal expenses is also embedded in these expenses. Thus, the Assessing Officer made addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 9,87,071/- on account of sale of scrap made by the A.O. eventhough well maintained and audited books of account have been before both the authorities that too after rejecting the books of account u/s 145(3). The disallowance is illegal and without jurisdiction. It be quashed on set aside. (4) On the facts and circumstances of the case and in law the addition of ₹ 2,90,887/- made by the A.O. out of loading and unloading charges and confirmed by Ld. CIT(A) is illegal and without jurisdiction. It be quashed and set aside. (5) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the disallowance of ₹ 3,54,651/- equal to 20% of ₹ 17,73,271/- of expenses on ad-hoc basis. Such disallowance is illegal and without jurisdiction. It be quashed and set aside. (6) On the facts and circumstances of the case and in law the moot question is whether when the accounts are rejected u/s 145(3) and still then A.O. has made various additions amounting to ₹ 33,90,712/- to the returned income of ₹ 10,25,047/- is nothing but enhancement of income made by the A.O. and confirmed by CIT(A) without following due proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year is less than the GP of 19.39% for A.Y. 2009-10 and 26.34% for A.Y. 2008-09 the Assessing Officer conducted deep enquiry and found that assessee has made bogus claim of machining charges to reduce its gross profit. He therefore made addition of machining charges at ₹ 14,73,396/- paid to sister concerns and ₹ 2,84,707/- paid to others on this account. Similarly, he also made addition on account of scrap sales since according to him the sale of scrap during the year as a percentage of total turnover is much less than the sale of scrap in the preceding 2 assessment years. The Assessing Officer made disallowance of ₹ 2,90,887/- out of loading and unloading expenses at 50% of such expenses claimed being unverifiable in nature. The Assessing Officer further made addition of ₹ 3,54,651/- out of various expenses claimed in the profit and loss account being not supported by proper vouchers and on account of personal expenses being not ruled out. 15. I find the Ld.CIT(A) upheld the action of the Assessing Officer on the ground that assessee was not able to substantiate the fall in the GP and could not point out as to how the order passed by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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