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TMI Blog2017 (3) TMI 1472X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 18,70,579/- made by the AO treating assessee's income from other sources whereas the same income was shown by the assessee in profit and loss account. 1.0 We are deciding both the grounds together. Ground no. 1 relates to deletion of addition of Rs. 44,68,220/- made by applying net profit rate of 8% after invoking the provisions of Section 145(3) of the Income-tax Act, 1961 and ground no.2 relates to addition of Rs. 18,70,579/- by treating income from other sources. 1.1 Succinctly, facts as culled out from the orders of lower authorities are that the assessee is a Private Limited Company and deals in trading of aluminum conductor and aluminum scraps and makes sales on account of exports as well as domestic. The return of income was filed on 26.04.2011 declaring total income of Rs. 6,25,650/- under normal provisions of the Act and income of Rs. 4,00,419/- u/s 115JB of the Act. During the course of assessment proceedings, the assessee was asked to produce original books of accounts, copies of sale bills and purchase bills, audit report, bank statements etc. However, the assessee could not produce the sale bills, purchase bills, vouchers of expenses, property documents, expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Before the ld. CIT(A), the assessee has placed copy of FIR stating that the original FIR could not be found. The assessee also produced all details of sales and purchase and has emphasized the fact that the trading activities were only taken during December to March, which were limited with only two parties, namely, M/s. Krishna Profile Private Limited Company and M/s. Overseas Metal Trading Company, U.A.E. The assessee also placed copy of the order of the Commercial Tax Authority contending that there was no variation in the sales declared by the assessee. As per the order of CTO, the sales of the assessee was same as shown by the assessee in its return of income. It was also contended that other income shown at Rs. 18,70,579/- was on account of DEPB licence, which was duly documented and shown in the profit and loss account. It was also contended that the rates of purchase and sales from M/s. Krishna Profiles Limited were comparable with non other related parties. Considering all these facts, the ld. CIT(A) held that the rejection of books of accounts u/s 145(3) and estimated income @ 8 % on total sales is without any basis, hence, the addition of Rs. 44,68,220/- was deleted. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) and estimating the profit at 8 % pm disclosed sales. The ld. AR submitted that the books of accounts were rejected by the AO as there was variation in the sales shown in the sales register and as shown in the profit and loss account. However, the sales shown in the sale registers were including of excise duty and cess. Therefore, the same were shown at Rs. 5,94,35,212/- in sales register, whereas the actual sales excluding excise and cess are at Rs. 5,58,52,756/-. Further, the assessee has also filed copies of orders of Commercial Tax Authorities, which also shows the sales of assessee as declared by the assessee in his audit report and profit and loss account. The information obtained by the AO from Sales Tax Authorities was not correct as the same does not contain the sales shown by the assessee, whereas correct sales are disclosed to sales tax, which is reflected in their assessment order dated 04.11.2010. Therefore, rejection of books of accounts by the AO was not justified and hence, the ld. CIT(A)'s finding in this regard is correct. As regards estimation of income @ 8% on total sales, the ld. Authorized Representative of the assessee submitted that there is no basis to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the view that the AO was justified in invoking the provisions of section 145(3) of the Act. 1.5.1 As regards the application of net profit rate at 8 % on the total sales, we find that the assessee has shown net profit at Rs. 4,00,419/- profit before tax on total sales at Rs. 5,58,52,756/-, in its profit and loss account which gives the net profit rate of 0.72 %, which appears to be on lower side. We also find from the submission made by the assessee before the CIT(A) that the assessee has given certain examples of sales and purchases and gross margin according to which gross profit comes to 2.01 % on some export sales and 1.96% on transaction with reference to domestic sales (page 12 of appeal order). We also find from the submission of the assessee as appearing at page 21 of appellate order, which reads as under :- "This net margin has to be practically considered after the DEPB to be received by the company which is Rs. 18,70,579/-, if we add this DEPB the gross margin of the company works out to [ (10,35,980 + 18,70,576)/5,59,47,136/-) which is 5.20% of the total sales. This show that the gross profit margin of a trading concern showing at 5.20% is a reasonable marg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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