TECH DATA ADVANCED SOLUTIONS (INDIA) P. LTD. (EARLIER KNOWN AS AVNET TECHNOLOGIES SOLUTIONS INDIA PVT. LTD.),MUMBAI vs. DCIT, CC 1(4), MUMBAI

This appeal by the assessee is directed against the order of Commissioner of Income Tax Appeals-47, Mumbai (hereinafter referred to as “the CIT(A)”) dated 05/09/2022 for assessment year 2012-13.

The assessee in appeal has raised as many as five (5) grounds assailing the findings of CIT(A). The Ld. Authorised Representative (AR) of the assessee stated that the effective grounds of appeal

The ld. AR of the assessee submits that the CIT(A) has decided the issue purely on assumptions. The CIT(A) has erred in observing in para 6.8 of the impugned order that the assessee has failed to show, that the goods are sold below the cost price. The CIT(A) has estimated GP rate of 8% following the order of Tribunal in AY 2010-11 and 2011-12. However, no such finding was given by the Tribunal on GP percentage in AY 2010-11 and 2011-12. The ld. AR submitted that in AY 2010-11 and 2011-12, the AO had rejected the books and had estimated G.P. The assessee assailed the findings of AO before the CIT(A). The CIT(A) in AY 2010-

The ld. AR pointed that during scrutiny assessment proceedings, the AO vide notice dated 24/07/2015 u/s 142(1) of the Act had raised specific query (serial no.11) about the comparative analysis of GP and NP ratio of last 3 years including current year and to justify the reason for fall, if any. The AO vide said notice (query no.15), further asked the assessee to furnish party-wise details of purchase and sales above Rs.10 lacs along with their current address and VAT number. The assesee replied to the notice on 24/08/2015. The assessee furnished party-wise details of purchase and sales as sought by the AO in the notice. Thereafter, vide reply dated 24/09/2015, the assessee furnished comparative analysis of GP and NP ratios of last 3 years. The reasons for drop in GP ratio were also explained. Subsequently, the assessee vide reply dated 29/03/2016 gave detailed reasons for low GP. The AO without considering the replies furnished by the assessee completed the assessment. The AO merely placed reliance on the assessment order for AY 2011-12. All the details furnished by the assessee were available before the CIT(A). The first appeal was pending before the CIT(A) for over 6 years. At no point of time the CIT(A) asked for any particular document. On the contrary, the assessee on every date of hearing before the First Appellate Authority made submissions explaining the transactions. No defect was pointed by the AO for rejection of books. As stated earlier, the books were rejected merely on the basis of findings in the preceding assessment year. The ld. AR of the assessee prayed for set asiding the findings of the CIT(A) on this issue and to allow the appeal of assessee.

We have heard the submissions made by rival sides and have examined the orders of authorities below. The primary issue before us for adjudication is rejection of books of account of the assesse and determination of GP rate at 8% of turnover.

A perusal of the assessment order shows that the AO has rejected the books of assessee invoking provisions of section 145(3) of the Act on the basis of observations made in the assessment order for AY 2011-12. There was purportedly discrepancy in the closing stock, for AY 2011-12, the same was taken as opening stock for AY 2012-13. Since, the closing stock was not accepted by the AO in AY 2011-12, the AO in the impugned assessment year rejected the opening stock and also rejected the books of assessee.

We find that in AY 2010-11 and 2011-12, the books of the assessee were rejected by AO. In first appeal, findings of the AO rejecting books was reversed and addition was deleted by the CIT(A). The Department carried the issue in appeal before the Tribunal. The Co-ordinate Bench in and ITA No.650/MUM/2016 (supra) upheld the findings of CIT(A). Thus, in effect rejection

The Tribunal in AY 2010-11 dismissed appeal of the Revenue against the findings of the CIT(A) in accepting the book results and deleting the additions by observing as under:

Another undisputed fact is that the Gross Profit rate in earlier years were much lower after excluding the service income. So far as the reconciliation of Service income & TDS figures reported in Form 26AS is concerned, no specific allegation of non-reporting of any income has been made by Ld. AO in the quantum assessment order and therefore, no adverse conclusion could be drawn therefrom.

In the impugned assessment year, the assessee during scrutiny proceedings had furnished details of purchase and sale as sought by the AO. The assessee had also furnished comparative analysis of GP and NP for the past 3 years and the reasons for fall in GP. The AO without considering the submissions of assesee and without giving reasons for rejecting assessee’s reasons for fall in GP passed the assessment order. The entire assessment has been framed in a whimsical manner placing undue reliance on the assessment order for AY 2011-12. It is an undisputed fact that the assessee being a limited company is under obligation to get the accounts audited under the Companies Act, as well as under the provisions of Income Tax Act. No defect has been pointed by the AO in the audited accounts of the assessee for the impugned assessment year. It is not the case of Revenue that the assessee has not followed the correct method of accounting or income has not been computed in accordance with the notified standards. The CIT(A) also in a mechanical manner accepted the findings of AO in rejecting books of the assessee. The CIT(A) has observed that the assessee failed to explain the reasons which led to fall in the GP with supporting documentary evidences. We find that the CIT(A) has failed to consider the reasons furnished by the assessee explaining sharp decline in GP rate.

Taking into consideration entire facts, we are of considered view that the CIT(A) has erred in confirming the findings of the AO in rejecting books of account and estimating GP rate of 8% without their being any adverse material on record. Hence, findings of the CIT(A) on this issue are quashed. The AO is directed to frame fresh assessment after allowing reasonable opportunity to the asessee to make submissions, in accordance with law.

In the result, appeal of the assessee is allowed for statistical purpose.