Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: MS SUCHITRA KAMBLE & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M.
This is an appeal filed by the assessee against the order of the ld CIT(A), Muzaffarnagar, dated 19.09.2014 for the Assessment Year 2010-11. Only issue involved in this appeal is that the Ld. Assessing Officer has determined the gross profit at the rate of 19.86 percentage whereas assessee has shown gross profit at the rate of 19.65 percentage therefore the addition of Rs. 212892/– made on account of low gross profit and added to the income of the assessee has been confirmed by the Ld. CIT – A.
The assessee has raised the following grounds of appeal:- “1. That the order U/s 143(3) passed by the AO is illegal, bad in law and without jurisdiction.
2. That, in view of the facts and circumstances of the ease the CIT(A) has erred on facts and in law in upholding the assessment order passed by the AO and also in upholding the additions made by the AO.
3. That in view of the facts and circumstances of the ease the CIT(A) has erred on facts and in law in upholding the addition of Rs.2,12.892.00 made on account Low Gross Profit.
4. That, the CIT(A) and AO failed to appreciate the fact that the books of accounts are properly maintained and showing the G.P. 19.65%, whereas the AO made the addition a 19.86%, which purely based on surmises and conjectures.
That, the CIT (A) has failed to appreciate the facts that the appellant has discharged its burden of proof as required under the law and the additions are totally illegal, bad in law and based on guesswork and surmises and conjectures. 6. The additions made and the observations made are unjust, unlawful and based on mere surmises and conjunctures. The additions made cannot be justified by any material on record. 7. That the explanation given evidence produced, material placed and available on record has not been properly considered and judicially interpreted and the same do not justify the additions/ allowances made. 8. That the impugned Assessment Order passed by the Assessing Officer and order passed by CTT(A) are against the principles of natural justice and the same has been passed without affording reasonable and adequate opportunity of being heard.” 3. Though assessee has raised eight different grounds of appeal
however only issue remains is the addition on account of gross profit.
4. The brief facts of the case show that the assessee is a company that is engaged in the business of manufacturing and trading of craft paper. The assessee filed its return of income on 15/10/2010 at a loss of Rs. 2380848/–. However income was offered under the provisions of section 115JB at Rs. 31,07,601/–. During the course of assessment proceedings, it was noted by the Ld. assessing officer that the assessee has produced the books of accounts, which were examined with reference to the vouchers. It was noted by the AO that during the course of assessment proceedings the assessee has earned gross profit of 19.65 percentage however during the preceding year the gross profit is been shown at 20.07 percentage, therefore the assessee was required to justify the reasons for the decline in gross profit. The assessee explained that the gross profit is only marginally lower compared to the last year. It was further stated that the entire purchase of raw material, their consumption, manufacturing expenses and yield of finished goods and further sale of finished goods are fully verifiable. It was further stated that the gross profit depends on so many factors as the demand and Page | 2 supply position of the finished goods as well as the hike in the electricity charges. The Ld. assessing officer rejected the contention of the assessee and held that the assessee has shown the selling price increase of Rs. 305 per metric ton in accordance with the increase in prices of raw material and other consumables. Therefore, he estimated gross profit taking the average of past 2 years at 19.86 percentages. Therefore the difference of gross profit of Rs. 2 12892/– addition was made to the total income of the assessee and the total income was computed as per the order under section 143 (3) of the income tax act vide order dated 25/3/2013.
5. The assessee challenges it before the Ld. first appellate authority who confirmed the order of the Ld. AO. Therefore, the assessee aggrieved with the order of the Ld. first appellate authority has preferred an appeal before us.
The Ld. authorized representative submitted that accounts of the assessee duly verified by the Ld. assessing officer and there was no defect pointed in that as well as any details produced by the assessee. He submitted that the accounts of the assessee are audited and therefore it should have been accepted in absence of any discrepancy. He submitted that merely because the lower gross profit is earned by the assessee who is also marginally lower the Ld. assessing officer as well as the Ld. first appellate authority does not have any right to discard the book results of the assessee without rejecting it.
The Ld. departmental representative vehemently supported the order of the lower authority and submitted that there is a downhill trend in the gross profit which assessee has failed to explain before the lower authorities and therefore the average of the last 2 years have been taken for working out the addition of the gross profit to the income of the assessee.
We have carefully considered the rival contention and perused the orders of the lower authorities. Without rejecting the books of accounts of the assessee the Ld. assessing officer has tried to import the gross profit level Page | 3