DCIT, MADURAI vs. M/S BEACH MINERAALS COMPANY, TIRUNELVELI CHENNAI

आदेश / ORDER PER ARUN KHODPIA, AM: These cross-appeals filed by the assessee and the revenue are directed against the order of the Ld. CIT(Appeals)-19, Chennai dated 27.02.2023 for A.Y.2013-14. Grounds of appeal

2. The CIT(Appeals) erred in confirming the assumption of jurisdiction u/s.153A of the Act and consequently erred in sustaining the search assessment completed without assigning proper reasons and justification.

3. The CIT(Appeals) failed to appreciate that the order under consideration was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law and ought

3 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023 to have appreciated that lack of valid seized materials for the purpose of quantifying the income escaped from taxation in terms of Section 153A of the Act would vitiate the additions made in the search assessment on various facets including the findings in Para 9 & 10 of impugned order.

4. The CIT (Appeals) erred in rejecting the books of accounts based on the findings recorded from para 39 of the impugned order by invoking the provisions of Section 145(3) of the Act and consequently erred in estimating the profits at 30% of the total turnover for the purpose of taxation without assigning proper reasons and justification.

6. The CIT (Appeals) failed to appreciate that in any event the estimation of profit at an exorbitant rate of 30% was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law and further ought to have appreciated that there was no scientific reasons assigned for estimating the profit at 30% thereby vitiating the findings rendered in Para 46 of the impugned order.

8. The CIT (Appeals) erred in not adjudicating the issue of disallowance of production and processing expenses aggregating to a sum of Rs.3,97,46,424/- as per para 18(iii) of the assessment order without assigning proper reasons and justification.

9. The CIT (Appeals) erred in not adjudicating the issue of disallowance of production and processing expenses aggregating to a 4 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023 sum of Rs.15,41,63,770/- as per para 19(ii) of the assessment order without assigning proper reasons and justification.

11. The CIT (Appeals) erred in not adjudicating the issue of disallowance of salary charged under the head 'vehicle spare parts & others' aggregating to a sum of Rs.4,05,43,898/- as per para 21(iii) of the assessment order without assigning proper reasons and justification.

12. The CIT (Appeals) erred in not adjudicating the objection to the action of the Assessing Officer being the credit entry appearing in the name of M/s Beach Minerals Sands Company as unexplained aggregating to a sum of Rs.4,31,49,643/- as per para 22(iii) of the assessment order as part of the computation of taxable total income without assigning proper reasons and justification.

13. The CIT (Appeals) erred in not adjudicating the objection to the action of the Assessing Officer in adding back the credit entry appearing in the name of M/s Balamurgan Chemicals P Ltd. as unexplained aggregating to a sum of Rs.23,10,52,649/- as per para 23(iii) of the assessment order as part of the computation of taxable total income without assigning proper reasons and justification.

14. The CIT (Appeals) erred in not adjudicating the issue of disallowance of land development expenses aggregating to a sum of Rs.68,47,351/- as per para 24(iii) of the assessment order without assigning proper reasons and justification.

16. The CIT (Appeals) erred in not adjudicating the issue of disallowance of Rs.2,80,00,000/- u/s 37(1) of the Act being certain expenses as per the assessment order dated 8.3.2016 without assigning proper reasons and justification.

17. The CIT (Appeals) erred in not adjudicating the issue of disallowance of Rs.1,96,604/- u/s 40(a)(ia) of the Act being C & F expenses as per the assessment order dated 8.3.2016 without assigning proper reasons and justification.

5 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023

19. The CIT (Appeals) erred in not adjudicating the issue of disallowance of Rs.19,47,402/- u/s 40(a)(ia) of the Act being the interest payments as per the assessment order dated 8.3.2016 without assigning proper reasons and justification. 20. The CIT(Appeals) failed to appreciate that the presumption of two sets of accounts was wholly unjustified and ought to have appreciated that the reliance placed on the information/statements was completely misplaced, thereby vitiating the addition made as part of the computation of taxable total income. 21. The CIT(Appeals) failed to appreciate that the audited / completed books maintained in tally (`accounted tally') should be considered as correct and ought to have appreciated that having not given any justifiable reasons for rejection of the books as maintained, the rejection of such books without examining the correctness of the same was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law. 22. The CIT(Appeals) failed to appreciate that having accepted the sales turnover as per the audited financials / complete set of books, the presumption of profit at the rate of 30% by impliedly confirming the charge of expenses in the said books as bogus without conducting necessary cross verification should be considered as unreasonable and in this regard further ought to have appreciated that the mechanical approach in adopting the incomplete books had distorted the true profits for taxation thereby vitiating the related findings in the impugned order. 23. The CIT(Appeals) failed to appreciate that the additions made without issuing appropriate show cause notice in the course of completing the search assessment should be reckoned as bad in law and further ought to have appreciated that there was complete violation of the principles of natural justice while such violation would render the consequential order as nullity in law. 24. The CIT(Appeals) failed to appreciate that there was no effective/proper opportunity given before the impugned order and any other passed in violation of the principles of natural justice is nullity in law.

6 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023

( by the Revenue)

1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law.

2. The Ld. CIT(A) erred in restricting the total disallowance of 104.69 Crores made in the assessment order to 30% of Sales turnover of Rs.183.35 Crores. 2.1 The CIT(A) erred in failing to appreciate that the assessment was made based on the incriminating materials seized during the course of search in the form two sets of accounts for the FY 2012-13 - One for the purpose of ascertaining actual profit from the business and other for the purpose of filing Income tax return. 2.2 The CIT(A) failed to appreciate that the assessee has made inflation of expenses under the head "Production and Processing expenses" land development expenses, unexplained credit entries in the name of group companies with the intention to suppress the actual profit in the return of income filed. 2.3 The Ld. CIT(A) erred in observing that the reasons given by the assessee for discrepancies in the accounts are reasonable and acceptable, without appreciating that the modus operandi adopted by the assessee (ie) maintaining two sets of accounts and inflation of expenses in the books of accounts considered for the purpose of filing IT returns was accepted by Shri. P. Senthil Muthukumar, Accounts Manager of M/s. Beach Minerals Company in his sworn statement dated 14/11/2018. 2.4 The Ld. CIT(A) erred in observing and concluding that since the AO had disallowed certain expenditure in the earlier assessment 143(3) proceedings, the assessee had maintained bills and vouchers for the expenses, without appreciating that the assessee had not neither filed evidence for expenses not adduced proper explanation for the discrepancies between the two sets of accounts during 153A assessment proceedings. Further, the present assessment is based on the entirely new set of facts arising out of materials seized during the search. 2.5 The Ld. CIT(A) erred in observing that the books of accounts of assessee, which are inaccurate, do not facilitate arriving at true and correct profits of the appellant and they are required to be rejected by invoking provisions of Sec.145(3) of the Act, without appreciating

7 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023 that the assessing officer did not find fault with the method of accounting but additions were made in the order u/s.143(3) r.w.s.153A on the basis of incriminating seized materials and for the reason that the assessee had not given proper explanation in respect of inflated expenses and unexplained credit entries found in the set of accounts relied on for the purpose of filing income tax return. 2.6 The Ld. CIT(A) erred in directing the assessing officer to estimate the business income © 30% of total sales turnover in the search assessment, especially when there were seized materials unearthed during the search, which were further corroborated by sworn statement recorded u/s.132(4).

3. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored.”

8 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023 admitting total income of the assessee at Rs.9,52,760/-. Notice u/s. 143(2) of the Act was issued on 12.11.2020. The Authorized Representative of the assessee submitted details pertaining to the computation of income statement, profit and loss account etc. on 19.11.2020. The Ld. AR has gathered certain evidences during the course of search which includes parallel set of accounts in hard disks and laptops, loose sheets evidencing unaccounted receipts/payments, depositions of key persons etc. Analyzing and examining of the documents gathered during the search proceedings, the Ld. AR has framed detailed assessment order and had made certain disallowances, after adding such disallowance a/w. disallowance already made in the order passed u/s.143(3) of the Act, the total income of the assessee was assessed at Rs.104,73,64,278/-.

9 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023

5. At the very inception of the arguments, the Ld. AR of the assessee has submitted that the A.O has made addition on independent issues whereas, the Ld. CIT(Appeals) has rejected books of the assessee and estimated profit of the assessee @30% based on assessee’s on profit in the immediately preceding years wherein, the assessee has earned net profit @29.77%. It was submitted by the Ld. AR that Ld. CIT(Appeals) while deciding the issue of estimating profit based on profit of the assessee’s own case, was unable to appreciate the fact that this was only year in which, assessee’s profits were high because there was some change in the mix of production wherein ratio of certain products which includes garnet and ilmenite was in a different proportion. It was, therefore, submitted by the Ld. AR that ratio of immediately preceding years is not comparable with the year under consideration and therefore, average of the profit which the assessee was attaining in the six years prior to the immediately preceding year i.e. A.Y.2011-12 should be the basis for determining the estimation in 10 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023 the assessee’s case. The written submissions was furnished by the Ld. AR of the assessee and the same is extracted as under:

“➢ The above appeals are filed by the Assessee and the Department against the order of the Commissioner of Income Tax (Appeals)—19, Chennai passed on 27.02.2023 for the assessment year 2013-14 and wherein the First Appellate Authority had rejected the books of accounts maintained by the Assessee in determining the profit at 30% of the total turnover. ➢ There was a search conducted at the premises of the Assessee on 25.10.2018 and the search assessment proceeding for the assessment year under consideration was initiated by the notice issued u/s 153A of the Act dated 03.01.2020. ➢ The search assessment was completed by the Assessing Officer on the presumption that the Assessee was maintaining two parallel set of accounts and made various additions in determining the assessed income at Rs. 104.73 crores which comes to 57% (approx.) of the total turnover. ➢ In this regard, the Assessee had established before the lower authorities that the books of accounts relied upon by the Department is provisional and various expenditure actually incurred by the Assessee at various sites/remote places including the group concern transactions were collated and compiled while finalizing the financials. The finalized books of accounts was subjected to tax audit and the return of income was prepared and filed based on the said books of accounts. BACKGROUND: ➢ The Assessee is engaged in the business of mining and extraction of mineral ores and the said activities were carried out during the assessment year under consideration across 9 mining sites and 7 administrative/factory units. ➢ The return of income originally filed by the Assessee during the assessment year under consideration in reporting the taxable total income at Rs. 9,55,760/- (which works out to 0.052% on the total turnover) along with the Tax Audit Report.

11 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023

➢The said return of income was selected for complete scrutiny u/s 143(2) of the Act and the Assessing Officer after scrutinizing the books of accounts maintained by the Assessee had disallowed a sum of Rs. 3,94,90,679/- for want of documents/vouchers and determined the taxable total income at Rs. 4,04,46,439/- (which works out to 2.21% on the total turnover). ➢ In consequence to the search, the Assessing Officer relying on the provisional / unaudited accounts had disallowed various expenses claimed by the Assessee in the final books of accounts mainly including the expenses duly recorded at various locations/sites compiled and accounted while finalizing the books of accounts. ➢ In the search assessment order, the Assessing Officer had determined the taxable total income at Rs. 104,73,64,282/- (which works out to 57.12% on the total turnover). VALIDITY of the seized materials: ➢ The various disallowance(s) and addition(s) made by the Assessing Officer is solely based on the provisional/unaudited accounts maintained by the Assessee and the statements recorded at the time of search. ➢ The additions made by the Assessing Officer in the search assessment proceedings is mainly on the presumption of inflation of expenses and group concern transactions not forming of the provisional/unaudited accounts. ➢ As stated earlier, the Assessee was operating in numerous locations during the assessment year under consideration and hence the operational expenses incurred in those locations were collated and duly recorded at the time of finalization of the accounts. ➢ The practical difficulties faced by the Assessee leading to the accounting various entries at the time of finalization of the accounts was demonstrated before the First Appellate Authority in the written submissions filed on 13.02.2023. ➢ Further, the said factual position was also demonstrated before the Assessing Officer justifying the genuineness for compilation of accounts at the time of filing the return of income. ➢ Hence, the provisional accounts cannot be treated as incriminating material for assuming jurisdiction u/s 153A of the Act and hence pleaded for quashing the search assessment order

12 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023 passed for the assessment year under consideration and thus render justice. REJECTION OF BOOKS OF ACCOUNTS: ➢ The Assessee submits that the books of accounts maintained by it completely scrutinized at the time of the original assessment completed in terms of Section 143(3) of the Act vide order dated 08.03.2016. ➢ The Assessing Officer after scrutinizing the entire books of accounts had made certain additions for deficiency in maintaining supporting documents/vouchers while determining the taxable total income. ➢ Further, the Assessing Officer had not rejected the books of accounts maintained by the Assessee during the assessment year under consideration at the first instance and in fact had identified certain areas were vouchers / supporting documents were not properly maintained which would establish the correctness of the audited final accounts forming part of the return of income filed by the Assessee. ➢ The Assessing Officer in search assessment order had impliedly not considered / rejected the books of accounts by solely placing reliance on the provisional / unaudited accounts maintained by the Assessee which is in contrary to the order passed during the original assessment proceedings. ➢ Similarly, the action of the First Appellate Authority in rejecting the books of accounts by completely overlooking the original scrutiny assessment order passed by the Assessing Officer wherein the books of maintained by the Assessee were completely scrutinized, examined and accepted. ➢ Hence, the Assessee submits that the rejection of the books of accounts for the assessment year under consideration is wholly unjustified and not sustainable in law insofar as the deficiencies in the books of accounts were already considered and brought to tax during the completion of original assessment. ➢ As a consequence, it is prayed for restoring the original position namely the income quantified and assessed in the original scrutiny assessment for the assessment year under consideration and thus render justice.

13 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023

ESTIMATION OF PROFIT: ➢ In any event, the assessee submits that the estimation of the profit at an exorbitant rate of 30% on the total turnover by the First Appellate Authority is erroneous, arbitrary and without any basis. ➢ As stated in the earlier paragraphs, the net profit reported by the Assessee is at 0.052% and the same was enhanced to 2.210/0 in the original scrutiny assessment based on the final books of accounts forming part of the return of income filed by the Assessee. ➢ The First Appellate Authority while rejecting the books of accounts maintained by the Assessee had wrongly adopted an exorbitant rate of 30% based on the income reported for the assessment year 2011-12 and however had ignored the income reported for the immediately preceding assessment year 2012-13 wherein the Assessee had reported net profit at 0.91% of the total turnover. ➢ The tabulation showing the income earned and profit reported for various subsequent assessment years are as under:

➢ In such circumstances, the Assessee pleads for restoring the original assessment position as per the original assessment order and further pleads for determining the assessable profit at 2.21% by reversing the order of the First Appellate Authority in dismissing the Revenue's appeal and allowing the Assessee's appeal in the interest of justice.

7. Contrary to the submissions of the Ld. AR, the Ld. CIT-DR argued and drew our attention to Para 3 and 4 of the assessment order passed

15 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023 u/s.153A of the Act wherein it was observed by the A.O that when the assessee’s premises was searched and evidence were collected during the course of search, it was revealed that the assessee was maintaining parallel set of accounts concealed in hard disk and laptops, certain loose sheets were impounded from the assessee’s premises evidencing unaccounted receipts/payments. It was further submitted by the Ld. CIT- DR that originally said accounts were maintained by the assessee in folder named “Ori” and the accounts maintained for income tax purpose were maintained in a folder named “IT”. It was submitted by the Ld. CIT-DR that such practice of the assessee to maintain two parallel accounts itself shows that there was something which shows the assessee’s modus- operandi to conceal the facts from the department in order to evade taxes. The Ld. CIT-DR drew our attention to Page 29 of the A.O wherein under Point No.16 (i), a screen shot of ledger of one entry dated 15.03.2013 was extracted by the A.O wherein against the narration “adj” was written which clearly shows that “adj” stands for adjustment. It was also submitted by the Ld. CIT-DR that the A.O had rightly pointed out that corresponding entries are absent in the books of the assessee. It was also allegation of the revenue that the assessee had incurred certain expenses wherein services were taken from group entities and the same was not found in the books of accounts of either of the group companies.

16 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023

10. The Ld. CIT-DR further discussed a chart submitted by the Ld. AR of the assessee in written submission and has strongly objected on the argument of the Ld. AR to adopt an average percentage of the profit from 17 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023 the period A.Y.2011-12 to 2017-18 because percentage of profit in those years were not substantiated with any basis to be adopted in the relevant A.Y.2013-14. The Ld. CIT-DR further submitted that the department has assailed the issue that there was gross error on the part of the CIT(Appeals) in restricting the disallowance of 104.69 crores made by the A.O after examining and analyzing the issues and the confiscated material duly supported by demonstrating in detail in the assessment order. It was submitted by the Ld. CIT-DR that the Ld. CIT(A) had erred in appreciating the fact that the assessment was made based on incriminating material seized during the course of search in the form of two sets of accounts for the F.Y.2012-13, one for the purpose of ascertaining actual profit from the business and other for the purpose of filing income tax return. Accordingly, the CIT-DR submitted that the CIT(Appeals) had failed to appreciate that the assessee had made inflation of expenses under the head “production and processing expenses”, land development expenses, unexplained cash credit entries in the name of group companies with the intention to suppress the actual profit in the return of income filed. The Ld. CIT-DR also advanced an argument that the order of the CIT(Appeals) was erroneous in so far as observing that the reasons given by the assessee for discrepancies in the accounts are reasonable and acceptable, without appreciating that the modus operandi adopted by the assessee (i.e) maintaining two sets of accounts and inflation of expenses in the books of 18 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023 accounts considered for the purpose of filing IT returns was accepted by Shri. P. Senthil Muthukumar, Accounts Manager of M/s. Beach Minerals Company in his sworn statement dated 14/11/2018.

19 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023

20 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023 be the case in any business. According to the Ld. AR that top line figures of the assessee’s business were never disputed by the Ld. A.O and the same was accepted by the CIT(A) also. However, the percentage of profit adopted by the CIT(Appeals) for the assessee was also very exorbitant and high as compared to the profits of the assessee firm as were achieved in the earlier financial years. It was, therefore, prayer of the Ld. AR that percentage of profit should be taken at the average of the profit in A.Y.2011-12 to 2017-18 leaving apart A.Y.2011-12 wherein, profit was high due to several factors which were not there in other assessment years so as in the relevant assessment year i.e. A.Y.2013-14.

21 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023 statements Modus Operandi of accounting of the assessee firm was scripted by the Ld AO. Exhaustive workings a/w screen shots of the ledger accounts were produced in the Assessment Order by the Ld AO and disallowances were made. Aggrieved by the additions, the assessee agitated on the issues before the Ld CIT(A). Ld CIT (A), without touching the merits of individual additions, have observed that the reasons explained by the appellant for the discrepancies that occurred in the books of accounts as identified by the AO in the assessment order are reasonable and acceptable having regard to the nature of business, the remote locations where the business operations are carried on, the non-availability of skilled accounting staff in such remote locations, multiplicity of group companies with similar sounding names and frequent inter-group company transactions. It is further noticed by the Ld CIT(A) that various discrepancies as have been identified by the AO and the appellant was confronted with the same, the appellant is required to reconcile the said discrepancies. However, since the appellant has brought out various constraints in carrying out such reconciliation and furnishing the supporting bills and vouchers in the written submission by stating that it is unable to do so at present in view of the passage of time and frequent changes in the accounting staff working with the appellant. It is considered by the Ld CIT(A) that the said submission of the appellant cannot be disregarded in view of the genuineness of the practical difficulties

22 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023 expressed by the appellant. At the same time, it is not possible to accept the correctness of the claims in the books of account unless the discrepancies pointed out in the Assessment Order are subjected to necessary reconciliation. Ld CIT(A) decided the appeal with the following observations: 43. In this context, it is pertinent to observe that this is not a case where the appellant is attempting to give incorrect reasons for its inability to produce the supporting bills and vouchers. The case of the appellant for the instant Assessment Year was subjected to regular scrutiny assessment U/s.143(3) vide order dated 08.03.2016. As evident from the contents of the said Assessment Order, the AO required the appellant to produce the bills and vouchers in support of the expenditure debited towards mining, production and processing and other expenses during the course of the said Assessment proceedings. The appellant produced the supporting bills and vouchers before the AO in response to the same. The AO stated in the Assessment Order that he carried out the verification of the said bills and vouchers and he found that the vouchers to the extent of Rs.2.80 Crores were beyond proper verification and that the claim of the appellant to the said extent was not fully proved. The AO therefore made disallowance of production and processing expenses to the tune of Rs.2.80 Crores in the original Assessment Order. The facts narrated in the said Assessment Order clearly bring out the fact that the appellant maintained the bills and vouchers in support of the expenditure debited to the P & L Account and that the same were verified by the AO during the original Assessment proceedings.

sales turnover for the purpose of estimating the business income of the appellant. The AO is accordingly directed to determine the business income of the appellant at 30% of the sales turnover of Rs.183.35 gores. Since the business income is being determined on estimate basis, it is held that the individual additions made to the income in the original Assessment Order dated 08.03.2016 get subsumed in the said estimated business income and the same not required to be considered separately. The AO is directed to consider the interest receipts of Rs.14,11,587/- and commission receipts of Rs.6,91,482/- credited to the P & L account separately apart from the estimated business income while determining the total income. The relevant grounds of appeal arc therefore partly allowed.”

15. On perusal of the aforesaid observation of the Ld CIT(A), it is evident that the case of the assessee was subjected to assessment for the instant year under section 143(3) of the act and that all the necessary bills, vouchers documents and submissions pertaining to expenditure debited towards mining, production and processing and other expenses during the course of the said Assessment proceedings were submitted by the assessee as required by the Ld AO. Such evidence were duly verified by the AO, thus have made a disallowance of Rs. 2.80 Crore under the head production and processing expenses in the original Assessment Order. It is therefore well established that the appellant had maintained the bills and vouchers in support of the expenditure debited to the P & L Account and that the same were verified by the AO during the original Assessment proceedings. It is further observed by the Ld CIT(A) that in spite of the fact that the assessee was unable to reconcile the discrepancies/ inaccuracies by 25 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023 furnishing the correct details of relevant transactions along with the supporting bills and vouchers, no dispute with regard to books of accounts maintained by the assessee were noticed by the Ld AO. In such a situation, considering the additions made by Ld AO the total assessed income of the assessee was computed at Rs. 104.73/- Crores, whereas the total sales turnover, which was untouched and remain undisputed was Rs. 183.25 Crores, thus the resultant % of Net Profit was arrived at 57.12%, this % was considered as absolutely abnormal and high by the Ld CIT(A). Ld CIT(A) has very rightly commented that such a huge profit margin is abnormally high in any line of business and thus indicative that the discrepancies pointed out in the accounts by the Ld AO cannot be considered to be arising wholly from the wrong claims of expenditure by the assessee/appellant. Ld CIT(A) thus after considering the books of accounts of the assessee firm, as inaccurate which do not facilitate to arrive at true and correct profit of the appellant have rejected the same by invoking the provisions of section 145(3) of the Act. Under the facts of the present case, we approve the observation of Ld CIT(A) relating to rejection of the books of assessee and uphold the same. Ld CIT(A) consequently, estimated the profit of the firm @30% of the sale turnover, the basis for 30% was returned income of AY 2011-12, wherein the assessee has earned a profit of 29.77% before claiming exemption u/s 10B of the Act. On perusal of the order of Ld CIT(A), it is not transpired that while estimating

26 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023 the profit taking the base year as AY 2011-12 (FY 2010-11), whether this fact was confronted to the assessee firm or not to submit their objections or confirmation on the same. However, to demonstrate the actual ratio of profit and its comparability with the year under consideration (FY 2012- 13, AY2013-14), Ld AR of the assessee firm had submitted a chart of production for the financial years 2010-11 to 2016-17, the same extracted as under:-

28 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023

Departments cross appeal no ITA 532/chny/2023. 18. As, we have decided the appeal of the assessee in ITA 366/chny/2023 in case of the assessee M/s Beach Minerals Company for the assessment year i.e AY 2013-14, wherein order of the Ld CIT(A) is upheld with certain modifications in terms of our observations herein above, our findings in ITA 366/chny/2023 shall mutatis-mutandis apply to the appeal of department in ITA 532/chny/2023. Consequently, appeal of the revenue stand dismissed.

29 M/s. Beach Minerals Company Vs. ACIT, CC-1, Madurai & 532/Chny/2023 observations herein above. Contentions if any which were not argued or dealt with became academic and thus not adjudicated separately.

Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board on 09.08.2023.

Sd/- Sd/- V. DURGA RAO ARUN KHODPIA (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) चेन्नई / Chennai ; दिनांकनांक / Dated : 09th August, 2023 SB आदेश की प्रतिलिपि अग्रेषित त / Copy of the Order forwarded to :

1. 1. अपीलार्थी / The Appellant. 2. प्रत्यर्थी / The Respondent.

3. The CIT(Appeals)-19, Chennai 4. The Pr. CIT-2, Chennai. 5. विभागीय प्रतिनिधिधि, आयकर अपीलीय अधिकरण, चेन्नई बेंच, चेन्नई / DR, ITAT, Chennai Bench, Chennai गार्ड फ़ाइल फ़ाइल / Guard File. 5. आदेशानुसार / BY ORDER,

निजी सचिव / Private Secretary आयकर अपीलीय अधिकरण, रायपुर / ITAT, Raipur.