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आदेश/Order
Per Sanjay Garg, Judicial Member:
The captioned are the cross appeals, one by the assessee and other by the Revenue against the order dated 26.10.2016 of the Commissioner of Income Tax (Appeals), Patiala [hereinafter referred to as ‘CIT(A)’].
There is one common ground in both the appeals relating to estimation of Gross profit (GP) for the purpose of taxation from the business activity of the assessee. The Assessing officer rejected the books
ITA Nos. 7/Chd/2017 & 1405/Chd/2016- M/s Ganpati Foods, Pataran 2 of account of the assessee for the year under consideration observing that
there was a variation in electric consumption viz a viz production of the
assessee. There were some instances noticed by the Assessing officer of
valuing the closing stock at a higher rate and further the Assessing officer
also found discrepancy in relation to certain expenditure incurred by the
assessee on purchase of certain items. Since the assessee could not furnish
the reliable evidences and convincing explanation in this respect, he
therefore, estimated the of GP rate of the assessee @ 16.62% of the turn
over on the basis of GP rate as declared by the assessee in the subsequent
assessment year.
Before the Ld. CIT(A), the assessee submitted that the GP ratio
differs from year to year. The assessee gave explanation also regarding
variation in the electricity consumption, valuation of the closing stock etc.
The CIT(A) after considering the submissions of the assessee and also
considering the past GP rate declared by the assessee estimated the GP at
12%. Now, both the assessee and Revenue have come up in appeal
agitating the above findings of the CIT(A).
The plea of the Department is that the Ld. CIT(A) should not have
disturbed / reduced the GP rate estimated by the Assessing officer at 16.62
% of the total turn over, whereas, the plea of the counsel for the assessee is
that considering the submissions of the assessee, the Ld. CIT(A) should
have estimated the GP at a much lower rate.
We have considered the rival submissions and have also gone through
the record. We have gone through the GP rates of the assessee in the past
ITA Nos. 7/Chd/2017 & 1405/Chd/2016- M/s Ganpati Foods, Pataran 3 and subsequent years. In the immediately subsequent assessment year, GP
rate shown by the assessee was at 14.23%, whereas, in the immediately
preceding year, the GP rate was at Rs. 8.96%. During the year the assessee
declared GP rate a 11.65% which was rejected by the Assessing officer.
Considering the variation in the GP rate and the explanation of the
assessee that production in a month cannot be entirely attributable to the
consumption of the electricity but there are various other facts involved
which have effect on the production and further that the assessee is not
only engaged in the rice production milling of its own but also is involved
in rice milling for the government agencies for which the electricity is
also consumed and that all the rice production cannot be considered
production of the assessee, but the assessee was only earning commission
income there upon and further considering the overall facts and
circumstances, we are of the view, that the interest of justice will be
served if the GP rate for the year under consideration is directed to be
taken at 12.50%. We order accordingly,
Apart from the above issue, the assessee has taken / agitated the
confirmation on addition of Rs. 2,04,000/- on account of non-charging of
interest from un-related parties. The Ld. Counsel for the assessee has
demonstrated before us that the aforesaid meager amount of Rs. 2.04 lacs
was advanced by the assessee out of his own funds and no interest bearing
funds were used for the aforesaid advances. Hence, there was no
justification for computing the notional interest by the Assessing officer.
The Ld. DR has also not disputed that the assessee was possessed of own
sufficient own funds to make the aforesaid advances. In view of this, we
do not find any justification on the part of the lower authorities in making
ITA Nos. 7/Chd/2017 & 1405/Chd/2016- M/s Ganpati Foods, Pataran 4 the aforesaid disallowance of Rs. 2.04 lacs on account of disallowance of interest out of expenditure. This ground of the appeal of the assessee is hereby allowed. No other ground is pressed or argued.
In the result, both the appeals of the Revenue and assessee are treated as partly allowed. Order dictated and pronounced in the Open Court immediately on completion of hearing on 13.12.2018.
Sd/- Sd/- ( बी , आर . आर . कुमार / B.R.R. KUMAR) (संजय गग� / SANJAY GARG ) लेखा सद�य/ Accountant Member �या�यक सद�य /Judicial Member
Dated : 13. 12.2018 “आर.के.” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File
आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar