TMI Blog2011 (12) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The order of the ld CIT(A) is contrary to law and to the facts and the circumstances of the case. 2. The ld CIT(A) erred on facts and in law in not properly appreciating the factual and legal matrix of the case as clearly brought out in the order of the AO. 3. The ld CIT(A) erred on facts and in law in not appreciating that the assessee has failed to give the source of suppressed purchases and therefore they required to be added u/s 69 of the Income-tax Act and thus deemed to be income of the assessee. 4. The ld CIT(A) erred on facts and in law in not appreciating that entire amount of sales which comprises (purchases + gross profit) requires to be added because no deduction is available against unexplained purchases deemed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement amounting to ₹ 7,62,509/- should be treated as understated sales and the corresponding gross profit should be added to the income of the assessee. However, the Assessing Officer rejected the explanation of the assessee and added the suppressed sales as undeclared income, against which the assessee preferred appeal to the Commissioner of Income-tax (Appeals). 3. Before the Commissioner of Income-tax (Appeals), the assessee submitted detailed explanation. The Commissioner of Income-tax (Appeals) after considering the submissions of the assessee came to the following conclusion: 5.4 After due consideration, I am of the view that the contention of the appellant merits acceptance. There is no dispute about the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has relied upon the second possibility viz. that there are no suppressed purchases. However, in doing so, the AO has ignored the fact that his choice of the second possibility has led to abnormal results, as is explained hereunder. 5.6 There can be no denying of fact that appellant s clients are reputed persons of the city and therefore, the appellant cannot take any chance with regard to the quality of the milk supplied, meaning thereby, it is imperative for the appellant to maintain the quality of milk. This, in other words, means that the gross profit earned by the appellant from year to year will not show much variation. 5.7 The gross profit shown by the appellant and accepted by the department in AYs 2003-04, 2004-05 and 2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the Commissioner of Income-tax (Appeals) made no mistake in holding that it is only the profit element in the sale consideration, which is required to be taxed and that there was no conclusive finding that any unrecorded investment has been incurred towards cost of acquiring the goods in question. In support of his proposition, reliance as placed on the judgment of the Hon ble Gujarat High Court in the case of CIT v. President Industries 258 ITR 654 (Guj) and of the Hon ble Calcutta High Court in the case of CIT v. Omer (S.M) 201 ITR 608 (Cal.) With regard to Ground Nos. 3 4 raised by the Revenue on the basis of section 69 of the Act, the learned Counsel pointed out that no addition has been made by the Assessing Officer by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be construed as income and it is only the profit element in such sales which could be assessed as income. The Commissioner of Income-tax (Appeals) has accepted the said position. 7. In so far as Grounds of Appeal raised by the Revenue are concerned, Ground Nos. 3 4 are based on the premise that an addition has been made under section 69 of the Act on account of suppressed purchases. We are in agreement with the plea of the respondent-assessee that the said Grounds are misconceived, inasmuch as the Assessing Officer has not invoked section 69 of the Act so as to make any addition on account of any unrecorded purchases. Nevertheless, in so far as action of the Commissioner of Income-tax (Appeals) in restricting the addition to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax (Appeals), it was contended by the assessee that the assessee had made payments to the farmers by6 bearer cheques/cash exceeding ₹ 20,000/- and those dairy farmers did not have local banking facility at local place. As per the assessee, such payments/expenses by the assessee to dairy farmers were excluded from disallowance under section 40A(3) of the Act vide Clause No. (f) (ii) and (h) of Rule 6DD of Income-tax Rules, 1962 and as such, it was prayed that the impugned disallowance be deleted. 9. The Commissioner of Income-tax (Appeals), after considering the submissions of the assessee, deleted the disallowance of ₹ 3,30,899/- by concluding as under in para 6.3 of his order: I have carefully considered the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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