Case Law Details
Brief of the Case
The Hon’ble High Court in this case held that when there is an assumption that the assessee did not maintain quantitative details of ingredients such as mixing gum, starch and oil, the conclusion could not be affirmed. As, decisions can’t be on the basis of mere Assumptions or Presumptions.
Facts of the Case
The assessee carries on his business in preparation and trading of Hing. The assessee filed its return for the Assessment Year (AY) 2010-11 and declared an income of ₹3,15,210/-. In the scrutiny the Assessing Officer (AO) rejected the turn-over figures and the G.P.Rate of 3.57% of the total sale and instead directed that G.P.Rate of 10% be applied, against the total turn-over of ₹6,14,84,607/-. The AO consequently added ₹39,54,014/-.
Contention of the Assessee
The assessee argues that the AO and other authorities fell into error in not taking into consideration that quantitative tally of ingredients and raw material was available in the records. It is contended that the AO’s opinion was influenced by the fact that the GP Rate claimed was 3.57% for the concerned AY as against the total turn-over of ₹6,14,84,607/-. The previous years’ turn-over figures did not follow any uniform pattern, both in respect of turn-over as well as in respect of GP Rate, and that the department in all its previous years had accepted the books of accounts and the method of maintaining them. Learned counsel for the assessee argued that the Revenue went ahead with the pre-disposed mind that the quantitative tally of the raw materials was not maintained in the assessee’s books.
Contention of the Revenue
The assessee’s contention was rejected after due consideration of material on record. Learned counsel highlighted that before the AO, the assessee had contended that due to family problems, the total turn-over for the current year in question had been lesser than previous years.
Held by CIT(A)
The CIT(Appeals) partially accepted the assessee’s contentions and granted relief to the extent that G.P.Rate was applied at 6.55% (as in the preceding year) and confirmed the addition of ₹21,21,220/-.
Held by the ITAT
The Hon’ble ITAT on the assessee’s further appeal refused to grant any relief and confirmed the finding of the lower authority.
Held by the Hon’ble High Court
The Hon’ble High Court in this case observed that where Assessee have submitted that a quantitative tally of all the raw materials consumed in the making/preparation of the final marketable product was being maintained and was noticed by CIT(A), the said authority did not render any finding. The ITAT by Section 145(2) agreed with CIT(A). In fact, there is an assumption in para 9 that the assessee did not maintain quantitative details of ingredients such as mixing gum, starch and oil. Due to it The Hon’ble High Court observed that such details were forthcoming both by way of books as well as through a quantitative tally, the CIT (Appeals) should have addressed himself to the issue and rendered clear findings. Consequently, the impugned order was set aside and the matter was remitted back to the CIT (Appeals) for fresh examination with regard to whether the quantitative tally was undertaken of the raw material used by the assessee in its business activities.
