TMI Blog2022 (4) TMI 1425X X X X Extracts X X X X X X X X Extracts X X X X ..... ld the order of the Ld.CIT(A) estimating the net profits of the assessee by adopting net profit rate of 0.5% of the turnover. - Decided against revenue. - ITA No. 240/Rjt/2016 & C.O. No. 01/Rjt/2017 - - - Dated:- 6-4-2022 - Ms. Annapurna Gupta, Accountant Member And Shri TR Senthil Kumar, Judicial Member For the Appellant : Shri Ajay Pratap Singh, CIT/D.R. For the Respondent : None. ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER :- The present appeal has been filed by the Revenue against the order passed by the Ld Commissioner of Income Tax (Appeals)-3, Ahmedabad, (in short referred to as CIT(A)), dated 27-04-2016, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the Act ) pertaining to Assessment Year (A.Y) 2010-11 and Assessee has also filed C.O. 2. None appeared on behalf of the assesse nor was any application filed seeking adjournment before us. We have noted that the assesse has remained unrepresented on several occasions in the past also when the appeal came up for hearing. The assessee does not seem to be interested in pursuing the appeal. Therefore the appeal was proceeded to be heard. 2.1 Briefly stated the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than preceding or later year. 5. We shall first we dealing with the cross objection of the assessee since the assessee has opposed the rejection of books of accounts in the same and which needs to be adjudicated first and only thereafter the issue of estimation of books profits, arising in both the assesse and the revenue s appeal, can be dealt with. CO-01/RJT/2017 6. The cross objection filed by the assesse, we have noted has been marked by the registry as being delayed in filing by 126 days. No application has been filed by the assesse seeking condonation of the delay. The cross objection filed by the assesse therefore is dismissed as been barred by limitation. 7. We shall now deal with the appeal of the revenue in: ITA No. 240/Rjt/2016. 8. The short question being with regards to the reduction in the estimation of net profits by the Ld. CIT(A) by applying rate of 0.5% to the total turnover of the assesse as opposed to 7% applied by the AO, and the Ld. D.R. vehemently relying on the findings of the A.O, it is pertinent to see and consider the basis adopted by both the revenue authorities for arriving at their estimation of net profit. 9. On going ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any is a salaried employee in M/s Indian Steel). It is tough to understand that why two companies operating from, the same added will purchase the goods from the assessee company. It seems that through this routine the assessee company has tried to compensate the profit carried in earlier period of F.Y. 2009-10 through booking loss. In spite of shortage of time and in absence of proper documentary evidences and explanations, a list of approximately 285 transactions have been prepared where transactions ( purchased through M/s Ruchi Global sold to M/s Indian Steel) have been carried out in the month of March 2010 and the assessee company booked a loss of 1,76 Cr. The total turnover of these transactions comes out to Rs. 35.73 Cr. Further the company has also made purchases from M/s Long Island company and have sold the goods to M/s Shiv Ratna Company at marginal loss. If we summaries the above transactions the total volume of transactions comes out to Rs. 37.82 Cr. on which total loss of Rs. 1.76 Cr. has been shown. The summary of the said transaction made in the month of March 2010 is as under: Inv. No. Period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply is very general in nature and without any evidences of contractual obligations and proof of commercial expediency. Further it is worth to note that loss has occurred not in one transactions but approx.. in 300 transaction taking place in the year end. No person of prudent business skills will book such looses in trading activities where bill to bill goods have been purchased and sold on the same or next day for 15-20 days through approx. 300 transaction. It is also important to mention here that both the companies belongs to same group (from which purchase and in turn sale, have been shown) and has same address. Thus there was no physical transaction of goods involved. These transaction are sham transaction , it is also confirmed by the following facts: (i) One of the Director ( Shri Jhalani)of the assessee company is the salaried employee of M/s Indian Steel. No details are available on record about the other director of the assessee company. (ii) No Bills have been produced for verification in support of physical transfer of goods. (iii) M/s Ruchi Global M/s Indian steel have same address in Indore. 10. Rejection of books of accounts and estimatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re operating at miniscule GP ratio of 0.5% to 1%. More so ever, in the absence of the any external /comparable, the A.O. should have analyzed the book results of the appellant in earlier year and later year before arriving at the reasonable estimate of GP/NP. The appellant had submitted details of sales and purchases month-wise, quantity- wise as well as party-wise before the A.O. as well as before the undersigned. It is apparent that transaction with M/s. Indian Steel Corporation Ltd. are not limited to only the alleged sham transactions. The appellant has made other sales also to this party and those sales in the earlier months of the financial year has resulted into significant profit. Month-wise sale-purchase and stock statement (value as well as in quantity) was submitted to A.O. as well as before me. (All these details were submitted to the Assessing Officer) If one has to reject all the sales to M/s. Indian Steel Corporation Ltd., major part of the turnover of the appellant will get wiped out. Needless to say, such exercise is not feasible. The A.O. has not given proper attention to the corresponding purchases from M/s. Ruchi Global which appears to me not in sync with the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parative GP ratios along with the audited books and gist of the same (for three years, including relevant financial year) is as under:- Total Turnover 250758982 736968737 2595778118 Increase/Decrease in Stock -59959722 50871881 23178182 Total 190799260 787840618 2618956300 Expenses 207345358 785623143 2617458244 GP -16546098 2217475 1498056 GP% -8.67 0.28 0.06 Adm. Expenses 250836 483172 1102259 NP -16627821 1768332 690370 NP% -8.71 0.22 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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