TMI Blog2003 (11) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee and an opportunity to cross-examine was also given to the assessee after which it was concluded that the above addition was valid." 2. Brief facts are, the assessee is a registered firm deriving income from trading in stainless steel and service charges for import of goods for others. Original assessment was framed on 29th Jan., 1986. The assessee had shown that it had earned service charges of Rs. 10,68,925 at 3 per cent from following parties against the goods imported by it and supplied to them: (i) M/s Formeta Industrial Corporation (ii) M/s Arihant Metal Industries (iii) M/s Parshuram Metal Industries The AO issued summons under s. 131 to these parties, who denied these transactions. The AO held that these transactions of sale to these parties remained unverified and are not genuine. The assessee itself imported these goods and sold these goods not to these parties but in the open market. In view whereof, the AO estimated that the assessee earned additional profit of 5 per cent on these transactions (over and above 3 per cent already declared by the assessee) and made an addition of Rs. 7,22,238. Aggrieved, the assessee preferred first appeal where the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made. In fine, in original assessment the AO had made addition only on account of service charges, whereas in reframed assessment consequent to Tribunal direction not only addition on account of extra profits was made but also the sale proceeds received by the assessee were held as assessee's undisclosed money and the addition was made. Aggrieved, the assessee preferred first appeal and contended that the addition made on account of sale proceeds was highly unjustified. The Department had accepted that the goods were imported by the assessee by investing its own money and there was no doubt about the same. The dispute was that the assessee had sold goods not to these three parties but in open market and these three parties were only hawala givers. Having accepted the source of purchase, the goods were at the disposal of the assessee and there may be doubt about the person to whom the goods are sold but as far as the sale proceeds were concerned, they cannot be held as undisclosed income of the assessee as the purchases were duly effected and were accepted by Department. 4. Regarding GP addition on account of extra income, the assessee contended that similar goods were sold b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of CIT(A), the Department is before us against deletion of addition on account of sale proceeds, whereas the assessee is before us against retention of 5 per cent as additional GP. 6. The learned counsel for the assessee reiterated the facts and contended that against original assessment order the issue before Tribunal was only estimation of GP, the assessment was set aside and restored back to AO only in this context and not in the context of making addition on account of sale proceeds. It is further clear from the Tribunal order in para 6 that there was no mention about the normal gross profit rate applied in the cases where the goods were imported into the country and not sold on high sea basis. This concluding remark in setting aside order by Tribunal clearly shows that what was set aside to AO was only the question of estimation of GP and not the addition on account of sale proceeds. Regarding GP, the learned counsel contended that the assessee sold imported goods to eight parties out of which five were accepted by the Department and three parties denied to have purchased the goods and the AO has treated them as hawala parties. In any case, the facts remain undispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books, the assessee did not furnish any satisfactory explanation in this behalf. Therefore the amount was rightly added by the AO. The CIT(A) has held that the addition was on the basis of surmises and conjectures and had no legs to stand, is not borne out from the record as it is amply clear that the transactions were dubious in nature. The order of AO was relied on. 8. The learned counsel for the assessee, in reply to GP addition, contended that the Tribunal set aside the matter on limited issue to examine the market GP rate; whole order of assessment was not set aside. The AO had no jurisdiction to go into other aspects. Reliance was placed on CIT vs. Mahindra Co. (1995) 125 CTR (Raj) 81 : (1995) 215 ITR 922 (Raj). Regarding the other issue, the learned counsel took us through the CIT(A)'s order and contended that the Department has itself accepted that the purchases of these imported items were genuinely made by the assessee and entered in the account books. Therefore, the source of sale of these goods was with the assessee. Even the factum of sale is not doubted by the Department. The doubt cast is only regarding the fact whether the sales were effected to those three pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment. The assessee is dealing in steel, where also the average profit is around 3.6 per cent. The CIT(A) has held that even though no comparable case has been brought in by AO, at the same time assessee could not establish that it has received service charges at 3 per cent only in view of the confessional statement of three parties. Apropos that, the assessee's contention is in the comparable cases of other five parties, which have been accepted by the Department, the service charges are at 3 per cent. We are of the view that the assessee discharged its initial onus of giving comparable cases. The AO should have made market enquiries and given some comparable cases. To this extent the issue before us suffers from infirmity. Be that as it may, it is obvious that the transactions were not made to these three parties. Therefore estimation in this behalf cannot be ruled out but the same has to be reasonable. Looking at the entirety of facts, we cannot accept the plea of assessee that the rate of 3 per cent as shown by it should be accepted but at the same time we find substance in the alternate plea that addition of 5 per cent over and above the GP declared by the assessee is on highe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
