TMI Blog2020 (12) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed u/s 143(3) of the Act. AO has estimated the profit of the assessee-company at 8% of opening stock held and purchases made during the year on the ground that the sale is not ascertainable with item-to-item purchase and stock held by the assessee. This is the incorrect method adopted by the AO. A perusal of the order of the CIT(A), as mentioned earlier clearly indicates that the assessee filed before the AO the relevant details. AO could have estimated the gross profit margin which is the surplus available out of the sales revenue, after subtracting the cost of goods sold. The correct method is indicated below: Gross Profit = Sales COGS Gross Profit Margin (GPM) = (Gross Profit X 100)/(Sales) AO has resorted to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nros Steels Pvt. Ltd. 2 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deciding the issue of sales turnover based on the submissions made by the assessee without affording an opportunity to the AO by way of remand proceedings and without obtaining data from M/s Conros Steels Pvt. Ltd., the purchaser of goods. 3. Briefly stated, the facts of the case are that the assessee filed its return of income for the assessment year (AY) 2013-14 on 20.01.2015 declaring total income of ₹ 64,620/-. The assessee is engaged in business of trading in HR and CR coils/sheets and galvanized coils/sheets on wholesale basis. During the course of assessment proceedings, the assessee submitted before the AO t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,00,000/-. If VAT of 5% was added to the gross value, it works out to ₹ 17,26,64,300/-. Thus the AO observed that it was not clear as to how the assessee sold goods valued at ₹ 18,00,00,000/- and why the same was not reflected in the audited P L account of the assessee. As per the AO, the assessee failed to provide item-to-item purchase and sale with mapping of goods delivered to Conros Steels Pvt. Ltd. and mode of delivery, copies of delivery challans, goods testing report, third party report for valuing the claim of loss etc. Accordingly, the AO rejected the claim of the assessee that it had sold goods valued at ₹ 17.26 crores to Conros Steel Pvt. Ltd. and that it had suffered loss on account of quality claims of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. By not accepting the error, the Gross Profit in the trading account comes to an absurd 71%, which is obviously incorrect. 4.6. The appellant has rebutted the allegation of the assessing officer that details called for were not submitted. The assessing officer has observed that if goods were defective, the assessee would not have taken possession of it. However, the nature of business of assessee is of trading. The claim raised by Conros is on account of quality mismatch. If there was no quality mismatch, then it implies that sales were made at a gross profit of 71% which as already noted is absurd. 4.7. It is also noted that similar levels of gross profit has been shown by the appellant in AY 2008-09, 2009-10 and 2012-13, which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee-company with specification of goods, correspondence made with Conros Steels Pvt. Ltd., copies of goods testing reports manufactured and supplied by the assesse-company to Conros. Reference is made by him to para 4.3 and 4.4 of the assessment order. In view of the above, the Ld. DR submits that the AO has rightly estimated the profit and made the addition of ₹ 2,79,83,359/-. 6. We have heard the Ld. DR and perused the relevant materials on record. The reasons for our decisions are given below. The Ld. CIT(A) has mentioned at para 4.4 of his order dated 16.06.2017 that before him the assessee stated that the following details were submitted during the course of assessment proceedings before the AO: i. Basis of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of trading in HR and CR coils/sheets and galvanized coils/sheets on wholesale basis. We further notice that similar level of gross profit has been shown by the assessee in AYs 2008-09, 2009-10 and 2012-13, which has been accepted by the AO in the assessment passed u/s 143(3) of the Act. 6.2 The AO has estimated the profit of the assessee-company at 8% of opening stock held and purchases made during the year on the ground that the sale is not ascertainable with item-to-item purchase and stock held by the assessee. This is the incorrect method adopted by the AO. The AO has mentioned at para 2 of his assessment order dated 31.03.2016 that the AR of the assessee attended and filed details. A perusal of the order of the Ld. CIT(A), as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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