TMI Blog2020 (9) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, in our considered opinion, firstly, ld CIT(A) has admitted and adjudicated the appeal which was not maintainable as per provisions of section 246A r.w. 250 of the Act. CIT(A) held that the action of the AO in estimating the gross profit margin at the figure higher of 56% of sales/turnover than the reported value of 53.88% is not entirely unjustified and same is upheld. Thereafter, the ld CIT(A) after noting the arguments of the assessee recorded hypothetical observation without any basis only based on surmises and conjunctures and without referring to the financial results of the assessee, without referring to ITSC order and voluntary consent of assessee for estimating GP rate @ 56% of sales/turnover and reduced the GPM from 56% to 55% ignoring vital facts supporting the action of the AO. Therefore, in our opinion, ld CIT(A), first of all, admitted and adjudicated the non-maintainable appeal and, therefore, gave relief to the assessee without any justified reason and legal basis tenable under provisions of the Act. AO was right in making addition on the consent of the assessee and keeping in view the order of ITSC for immediately previous seven assessment years by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is challenging partly confirmation of addition of 1.12% of the net sales turnover (less mining royalty) of ₹ 2,61,93,486/- and the revenue has challenged the order of the ld CIT(A) for reducing the gross profit rate from 56%, as determined by the AO, to 55% of sales/turnover. Since the sole ground in both the appeals relates to a single issue, therefore, for the sake of brevity and convenience, both appeals are being adjudicated together by this consolidated order. 4. We have heard the rival submissions and perused the materials placed on record of the Tribunal. 5. Ld A.R. of the assessee placing reliance on the decision of ITAT Bangalore B Bench in the case of Shri G.T.Umesh vs ITO, in ITA No.1321/Bang/2017 for A.Y. 2009-2010 order dated 29.3.2019 submitted that the estimation of gross profit made by the AO and modified by the ld CIT(A) is not sustainable as when the books of account of the assessee has not been rejected and the assessment having not been framed u/s.144 of the Act, then it has to be held that revenue authorities were in error in resorting to estimation of income and such exercise undertaken by them is not sustainable in the eye of law and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed by the Assessing Officer may file appeal to the Commissioner of Income Tax (Appeals). He further explained that as per the decision of Hon ble Kerala High Court in the case of CIT vs Vamadevan Bhanu, 330 ITR 559(Ker) that when the assessment was made on the basis of assessee s agreement, then the assessee cannot be presumed to be aggrieved and cannot appeal against such order passed under his agreement. He also placed reliance on the decisions of Hon ble Bombay High Court in the case of Rameshchandra And Company vs CIT, 168 ITR 375 (Bom), Hon ble P H High Court in the case of Banta Singh Kartar Singh vs CIT, 125 ITR 239(P H) and Hon ble Madras High Court in the case of Ramanlal Kamdar vs CIT, 108 ITR 73 (Mad) and submitted that the appeal to ld CIT(A) lies only when the assessee aggrieved by the assessment or reassessment order and when the assessee, during the assessment proceedings, has voluntarily agreed to accept a particular addition before the Assessing Officer, then the assessee cannot be held as aggrieved by that order and no appeal against such order is maintainable before any higher authority including ld CIT(A) and the Tribunal. 8. On merits of addition, ld CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by restoring that of the order of the Assessing Officer. 10. Placing rejoinder to above submission, ld A.R. submitted that if any addition has been confirmed by the ld CIT(A), then, the assessee has right to file appeal before the Tribunal and the appeal cannot be held as nonmaintainable only because the assessee was agreed to any addition before the AO, without considering surrounding facts and circumstances of the issue. Ld A.R. also submitted that the assessee never agreed for such estimation of addition @ 56% neither before the AO nor before the ld CIT(A). Therefore, the contentions and arguments made by ld CIT DR should be rejected and the gross profit as declared by the assessee @ 53.88% should be allowed by directing the AO to delete the entire addition on this issue. 11. Since there are cross appeals thus, the ld CIT DR is also entitled to place rejoinder on behalf of revenue on the department s appeal, therefore, with the direction and permission of the Bench, ld CIT DR submitted that no ground has been raised by the assessee before the ld CIT(A) challenging the addition on the allegation or contention that he was never agreed to the addition @ 56% of gross profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing observations: Estimation of gross profit @ 56% Previous to the current search seizure, one more search was conducted on 12.11.2009 u/s.132 of the I.T.Act, 1961. The assessee filed settlement application u/s.245C on 9.9.2011 before the Settlement Commission (IT WT), Additional Bench, Kolkata on 9.9.2011. The ld Settlement Commission passed order u/s.245D(4) of the Act on 28.3.2013 for the A.Y. 2004-05 to A.Y. 201-2011 by estimating gross profit @ 56%. The assessee agreed for 56% of gross profit in front of Settlement Commission . During the current year, the assessee has shown gross profit of ₹ 126,02,13,669/-, which is 53.88% of total sale. The assessee vide order sheet entry dated 28,.2.2014 is agreed for estimation of gross profit @ 56% of total sale as computed and estimated by Settlement Commission. Therefore, gross profit @ 56% of the total sale is calculated at ₹ 4,94,60,515/- 14. In view of above observation and findings of the Assessing Officer, it is clearly discernible that when the assessee vide order sheet entry dated 28.2.2014 had agreed for estimation of gross profit @ 56% on total sales, as computed and estimated by Settlement C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd incurring higher costs of collection created by the ambiguity surrounding the affairs of the Appellant. The Appellant is liable and duty bound to reimburse these applicable risks and costs. Such reimbursement must provide adequate recompense for the time and effort taken and expense incurred by Revenue in effecting assessment and collecting taxes due, and will also help Revenue realize returns in line with the risks absorbed by it. The attendant risks also include those generated by the possibility that the Appellant may be encouraged to employ tactics similar to those employed in the instant case in future. Therefore, the action of the AO in estimating the GPM at a figure higher than the reported value of 53.88% is not entirely unjustified and is upheld. What remains therefore is what needs to be the value of the GPM adopted. It is indubitably clear that the figure of 56% adopted by the ITSC relates to the affairs of the Appellant, and therefore in any case involving estimations, constitute a fair and reasonable basis bearing reasonable nexus to the available material and the circumstances of the case. The figure of 56% is not wild, capricious or arbitrary, and is cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a vote-of-confidence of 1.12% (55% less 53.88%) in the accounts and affairs of the Appellant. This is analogous but not equivalent to a 98.88% Confidence Interval around the real mean founded in the subject of Statistics. The premium of 1.12% can also be considered to be the recompense to the Government in absorbing the risks and incurring higher costs of collection created by the ambiguity surrounding the affairs of the Appellant created through sampling in the audit of accounts and business dynamics. w) The addition/assessment made on the count of differential GPM is therefore computed at 1.12.% (55% less 53.88%) of the Net Sales Turner (less Mining Royalty) of ₹ 233,87,03,900, which arrives at ₹ 2,61,93,484. 17. On perusal of the above findings of the ld CIT(A), we observe that the ld CIT(A), in para (r) (supra) noted that the action of the Assessing Officer in estimating gross profit margin (GPM) at a figure higher than the reported value of 53.88% is not entirely unjustified and is upheld. Thereafter, the ld CIT(A) in the same para stated that what remains therefore is what needs to be the value of the GPM adopted. Ld CIT(A) also observed that it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing assessment years 2004-05 to 2010-2011, the assessee, before the AO during the assessment proceedings, agreed to estimation of gross profit @ 56% of sales/turnover and this act of the assessee obviously stopped the AO from making further enquiry or observations and going deep into the books of account of the assessee and to take recourse of procedure mandated in section 145(3) of the Act. Thus, in our humble understanding, the assessee cannot be held as aggrieved from such addition which has been made on the voluntary consent of the assessee before the AO during assessment proceedings in the line of the Income Tax Settlement Commission. Therefore, first of all, we safely presume that the appeal of the assessee was neither maintainable before the CIT (A) nor before this Tribunal in view of the various decisions, as relied By ld CIT DR including the decision of Hon ble Kerala High Court in the case of Vamadevan Bhanu (supra). Therefore, in our considered opinion, firstly, ld CIT(A) has admitted and adjudicated the appeal which was not maintainable as per provisions of section 246A r.w. 250 of the Act. Secondly, from relevant operating paras, as reproduced hereinabove, in para 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition to the extent of ₹ 2,61,93,484/- out of total addition of ₹ 4,94,60,515/- made by the AO in estimating the GP @ 56% of the sales/turnover without finding any defect in the books of the assessee and without taking recourse of section 145(3) of the Act. Therefore, ld counsel placing reliance of the order of ITAT Bangalore in the case of Shri G.T.Umesh (supra), vehemently contended that the addition partly sustained by the ld CIT(A) is wrong and need to be deleted. 22. At the cost of repetition keeping in view observations of the AO in para 4 of assessment order, we may also point out that when the appeal of the assessee was not maintainable before the ld CIT(A) who allowed part relief to the assessee, then on the same hypothesis , the appeal of the assessee against partly confirmed addition cannot be held as maintainable and allowable before the Tribunal. Even if we consider the merits of the addition, then we find that the AO in para 4 of the assessment order clearly noted that the assessee voluntarily agreed for 56% of gross profit in front of the Settlement Commission and the assessee is also agreed for estimation of 56% of the total sales/turnover in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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