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× Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India

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05-07-2019, Tarapur Transformers, Section 35D, Tribunal Mumbai

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4 days 11 hours ago #10022 by amit
Section - 35D
Order Date - 05-07-2019
Favouring - Assessee
Court - Tribunal Mumbai
Appellant - ACIT
Respondent - Tarapur Transformers Ltd.
Citation - 719Taxpundit116
Appeal No. - ITA No.3320/Mum/2017 & 3323/Mum/2017
Asstt. Year - 2011-12 & 2010-11



These appeals in ITA No.3320/Mum/2017 & 3321/Mum/2017 for A.Y.2011-12 & 2010-11 respectively arise out of the order by the ld. Commissioner of Income Tax (Appeals)-21, Mumbai in appeal No.CIT(A)- 21/ITO-13(3)(4)/IT-421/2015-16 dated 06/02/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 28/03/2014 by the ld. Asst. Commissioner of Income Tax, Palghar (hereinafter referred to as ld. AO). Since identical issues are involved in these appeals, they were heard together and are being disposed off by this consolidate order, for the sake of convenience.

2. The first identical issue involved in these appeals is with regard to estimation of gross profit of the assessee. The facts of Asst Year 2010-11 are taken up for adjudication and the decision rendered thereon would apply with equal force for Asst Year 2011-12 also except with variance in figures.

3. The brief facts of this issue are that the assessee is engaged in the business of manufacture and repair of electrical transformers and had filed its return of income for the Asst Year 2010-11 on 11.10.2010 declaring total income of Rs 1,42,93,346/-. The ld AO observed that during the course of assessment proceed ngs, the assese submitted copy of return along with computation of total income together with tax audit report and its annexures, the details called for were furnished partly. The ld AO observed that the books of accounts in PDF form and some box files containing purchase bills for regular transactions and for purchase of fixed assets were produced for verification which were verified on test check basis. The ld AO observed that assessee has show gross receipts of Rs 32,98,49,592/- with gross profit of Rs 6,26,97,384/- (GP ratio of 19.01%) and net profit of Rs 2,64,55,414/- (NP ratio of 8.02%), in comparison with immediately preceding assessment year wherein the GP ratio and NP ratio was declared at 22.02% and 12.61% respectively. The assessee had explained for the reduction in GP and NP ratios to be reduced margins, delayed payments from customers, reduction in sale prices , under utilization of capacity etc. The ld AO observed that the books of accounts in PDF form were produced at the fag end by the assessee and hence the same could not be verified by him. The assessee also explained before the ld AO that books of accounts and some files were seized by the sales tax department and hence was unable to produce the same. The assessee also produced a copy of the receipt of sales tax department evidencing the seizure of books. However, the PDF version of the books of accounts were available with the assessee and the same were accordingly produced for verification. The ld AO observed that he had deputed his Inspector to verify the said fact of seizure by the sales tax department and it was learnt that the seizure of books were pertaining to earlier years and not the year under consideration. The ld AO observed that on 28.3.2013, the assessee submitted various ledger accounts in PDF format. Accordingly, the ld AO concluded that the assessee had intentionally submitted the books at the fag end to ensure that the same does not get verified by him.

3.1. The ld AO however proceeded to verify the reasons for fall in GP and NP ratio during the year when compared to earlier year. He observed that since the income from commodity transaction was a separate business altogether, the GP and NP ratios excluding income from commodity transactions were called for The ld AO reproduced the comparative chart of GP and NP ratios for the three years both including and excluding commodity transactions as under:-

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